Lately my mind has been drifting to thoughts of college days. It is the time of year for graduations, and our family recently proudly celebrated my nephew’s graduation from Villanova University. In addition, and I hate to admit it, last weekend visited my alma mater for my 25th year college reunion. To top it all off, Sunday was 5/29, which is our annual opportunity to help you brush up on the use of the Section 529 savings plan, to help the children in your life prepare for the expense of college tuition!
The Section 529 plan can be an excellent tool to save for college expenses. The primary benefit is that investments in a 529 plan will grow tax free, and if used to pay for qualified higher education the recipient won’t have to pay income taxes upon withdrawal either. It is also a little known fact that 529 plan funds are “portable”, which means that if one of your children doesn’t need to use all of her funds because she got a scholarship, or went to a less expensive school, you can shift those funds to another child.
Here are some good resources for FAQ’s about how 529 plans work
Statistics show that the income opportunity gap between college graduates and those who didn’t attend college is large and growing. In an exhaustive research review of the return on investment of a college education, the University of Toronto’s Philip Oreopoulos and Uros Petronijevic find that college is as good an investment as ever.
Of course, whether you use a 529 plan or some other savings plan, the important thing is to DO SOMETHING to save for the high costs of educating your children and grandchildren. A college education could be the best gift you ever give your child!