College Savings 529 Plan:
- Include college savings in your family’s monthly budget. Start when your kids are babies, maybe even before they arrive.Most states now offer 529 plans, an increasingly popular way to save for college expenses. You won’t take a tax deduction now, but the investment grows tax-deferred. When you’re ready to use the money to pay for college expenses, those distributions are free from federal taxes. There may be additional tax breaks in your state, too.
Your child’s age and, thus, the number of years to save for college, sets the investment strategy for your 529 plan. You may want to start when the kids are young so you take advantage of investments with a little more risk and a little more return.
Although 529 plans are state sponsored, your child isn’t required to attend a state school for 529 savings plans. By comparison, pre-paid 529 plans, however, have more restrictions. Ask questions.
Thinking about going back to college? You can even set up a 529 for yourself.
The bottom line: You may want to start saving for college as soon as possible and make it a habit.
