529 College Savings Plan

Saving money with a 529 college savings plan is yet another section of the IRS code, section 529. It's a plan that helps families set some money aside for their kid’s education to fund their college expenses in the future.

Most states have a 529 College Savings Plan. It's an easy way to save for college. You can open an account with as little as $50.00 shortly after your child is born or thereafter, but the sooner the better. It will require his or her Social Security Number to get started. Companies such as Vanguard and Fidelity offer these plans as well, but I think it's best to go with your state. I know the tax savings are much greater and there are incentives if your child and family decide to remain in the state to attend a local college or university. Moreover, contributions to your state's plan may be deductible on your state income tax return.

The most important feature here is that earnings grow tax-free. Withdrawals are free from federal income tax if they pay for qualified educational expenses such as tuition, room and board and other expenses covered under the plan. Your state may also offer tax free withdrawal. The benefits here are too many for a family not to participate in the plan.

Each year college tuition and other expenses keep rising. We read and hear about it all the time. Every family should take advantage of this simple way to save. Forget savings bonds, setup and an account and make it automatic with a monthly contribution that is automatically withdrawn from your checking account. Another great thing about these plans is that family members can make gift contributions to the plan. You can contribute up to 60K or 120K for a married couple filing jointly. During holidays and birthdays tell your family and friends that you have a 529 college savings plan setup for your child. It's an easy gift, no shopping required just write out a check to the plan and include the account number and send it in. Remember, college is only going to get more expensive so the sooner you start the better you and your child will be.

For more information and to compare plans by state, please click on this link: 529 Resource Page.

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