Save For College Education Through 529 Savings Plans529 saving plans help parents, guardians, or grandparents to save tax-deferred money for their loved ones' higher education. People can contribute money to 529 saving accounts which are allocated for college expense. One big advantage of 529 savings plans is that the money incurs tax-free interest. Also, you don't have to pay tax on the principal amount if you withdraw money for college expenses. The present rules of taxation will remain the same till 2010. After that its up to US congress to decide whether it will stick to present tax rules or to find some other alternative. Even if the Congress does not continue with the present tax code, tax rates will still not be applicable on the principal amount. It will only be levied on the earnings on the principal amount. The cost of higher education, public as well as private, is increasing at an alarming rate. According to statistics, the cost of higher education in public colleges has increased by up to forty percent. Going by these statistics, it can be concluded that costs will continue to rise in the coming years. Hence, it is highly imperative for families and parents to take immediate and early steps in order to ensure availability of finances for their children's higher education. The 529 savings plan is one such investment plan that can help them tide over the inevitable inflation. Every state in America now provides a 529 savings plan. Some states even offer more than type of plan. For example, Florida offers 529 prepaid tuition plans as well as conservative savings plans. It is a wrong notion that many people have about 529 savings plans that the child has to go to a college in same state. All the states have alternate agreements letting the investors to choose from numerous colleges across the country. 529 savings plans are one of the finest ways to save money for college education because of the following advantages: * Tax benefits Whatever investments are made in 529 savings plans are exempted from federal taxes. Earnings on the invested amount are tax-deferred. Also, the earnings are not prone to capital gain taxes. Withdrawals from the account if made for college expenses are exempted from federal income tax. * A number of investment options Many of the states in USA offer three to four saving options. 529 saving plans are monitored by experienced saving companies. * Flexibility in contribution options Anyone can contribute to the savings account. Friends and relatives are free to contribute on behalf of the beneficiary. * Control of parents over the account Parents, unlike in the traditional saving methods where the child gets hold of the money only after he reaches maturity, have control over the money in the 529 savings account. |