529 Comparison

529 College Savings Plan For Your Child's Education Needs

Want to get a college degree without getting buried under the burden of loans? If your answer is yes, then the solution may be a 529 account.
These days, the cost of higher education is much higher then just a few years ago. Statistics reveal that over the past 3 years the costs of a college education have increased at a rate far greater than the rate of inflation. As these costs rise, going to college has become a far away dream for people in the low and middle income groups. Especially hard hit are those who make too much income to qualify for need based financial aid, but not enough to afford to pay all the costs.

But now there is a way to help pay for a university degree without incurring a huge debt. A 529 account for college savings allows you to begin saving for a college education when your child is still young and have the money grow tax deferred until it's needed. Opening a 529 account may be the best option if you want to save for higher education of your child. With the 529 plan you contribute a particular amount every month, invest it in various options depending on your state, and when it's time for college, you can take the invested amount, as well as the interest earned and use it to pay college expenses. An added advantage of 529 accounts is that you do not need to pay taxes on any capital gains or interest as long as the money is used for qualified educational expenses.

There are two options for you if you want a 529 account.

* A 529 Prepaid Tuition Plan.
* A 529 Qualified Tuition Plan.

Advantages of a 529 account

1. No need to worry about the restrictions of residency.
2. No need to pay federal taxes (and in most states, state income tax) on the interest gained.

529 account - How does it worK?

A 529 account allows you to place your money in various investment portfolios. These accounts can be opened even for babies, so you can get a good head start towards saving for their college education. The first step towards this should be a proper research about the investment plan that suits your needs. The prepaid plan is restricted to only some selected schools and states, the 529 college savings plan is more flexible. Though each state has it's own 529 account, you can open an account in any state and you should check the advantages and disadvantages of each state before investing. The education expenses such as books, boarding costs, tuition fees, and other school expenditures can be easily met using funds from a 529 account.

All in all, a 529 account can prove to be a good bet to help finance your child's expensive college education.