Saving for a child’s college education can be a financial burden for many families. With today’s economy the way it is, you need to plan ahead. Saving money out of your monthly earnings may not be an option unless it is done before any taxes are taken from your checks.
The 529 college savings plan has now made it easier for parents to start saving for their child’s education as soon as they are born. The 529 college fund does have to be started before the child turns fifteen years of age per government regulations. There is no better time than the present to start saving.
The 529 college savings plan is similar to the 401K plan as far as being deducted from your earnings. You have to have a qualified beneficiary to open the 529 college fund. This can be a natural child, stepchild, grandchild, neice, or nephew. You can set up the account and allow others to contribute or they can set up their own accounts. The qualified beneficiary test will apply to anyone setting up the 529 college savings plan.
If your child decides not to further his or her education, you can transfer the money to another qualifying beneficiary. If you choose not to transfer the money, you can request a payout with a 10% percent penalty and you will be required to pay federal and state taxes on all contributions that came from payroll deduction.
The 529 college savings plan is the easiest way to make sure you have the funds available when your child is ready for college. Loans for college can drain a family’s budget and you cannot count on scholarships and grants. You will never know what will be available when your child is ready to attend college. The economy does not look bleak, but it does not look promising right now.
This means that you have to make plans. The best plans are utilizing the 529 college savings plan and knowing for sure, you will be able to send your child to college without a loan. If they do qualify for a scholarship or a grant, you can still use the money for things that they need for school that the grants and scholarships do not pay.
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