How To Start A College Fund
Parents of children often begin to worry about how they will be able to afford the college education of their child and wonder whether obtaining student loans is the only option available to them. Student loans are easily available but they can put a debt burden on the student. Parents may find themselves in a better position to decide to conduct some research and try to understand how to start a college fund.
One option that parents should be looking at is the 529 college savings plan which will be appropriate for their requirements. Student loans despite being available are not the perfect option for parents who may not want their children to be burdened by debts. Planning in advance and preparing for the college education of their children will give the parents an opportunity to set finances aside to start a college fund. The 529 college savings plan is a perfect platform which the parents should be utilized because they can save a significant sum of money by making an early start and saving as much or as little as they can. Let us understand how a 529 college savings plan can help parents to serve the funds required for the college education of their child.
Planning in advance and preparing for the college education of their children will give the parents an opportunity to set finances aside to start a college fund. The 529 college savings plan is a perfect platform which the parents should be utilized because they can save a significant sum of money by making an early start and saving as much or as little as they can. Let us understand how a 529 college savings plan can help parents to serve the funds required for the college education of their child.
Investing in a 529 college savings plan
The 529 college savings plan is named after a section of the Internal Revenue Code under which it was created and the plan allows people to save money for college education. The money saved will accumulate interest and can be withdrawn tax-free when it is being used for expenses related to education. Some 529 plans do not have any minimum dollar requirements and allow families to save as little or as much as they possibly can.
Parents who are accustomed to paying for everything in cash and save the small change and deposit the money in their checking on to be transferred to the 529 plan. As no minimum dollar requirements have been stipulated parents can decide to save just five dollars every week and rest assured they will save a significant amount over the course of the year. They will also have an opportunity to earn some interest which will again add up to the principal.
Choosing a 529 plan that is uncomplicated
Parents are advised not to choose a complicated 529 plan which offers great returns but to look for a 529 plan that has investment options suitable for individual requirements. Investment options that are age-based are excellent for account owners who may not want to manage the funds in their account.
Saving systematically and within the budget
Experts have provided an opinion that setting an automatic monthly deposit into the 529 plan is a convenient method for parents to remember they have set money aside for the college fund. However, it must also be noted that people may come across financial hardships and may not be able to meet the commitments they make every month. The experts have stated that parents should consider an amount they can afford according to their sources of income. The option of setting aside extra money whenever possible is anyway available for parents who have decided on a 529 college savings plan.
State benefits also available for 529 plans
Parents are advised to conduct some research and understand whether the 529 plan offered by the state where they are residing is offering any incentives because some states offer tax benefits to any plan in the country. According to information provided by experts, state benefits can be close to nearly $1000 every year.
When parents decide to invest in 529 college savings plan they are only required to pay income taxes on the money they invest in the plan. The earnings on this investment are exempt from income tax even when the money is withdrawn to pay for college education.
Parents who decide to start a college fund and save money over an extended period of time will find they are getting tax breaks to the tune of thousands of dollars. This is one of the most lucrative tax incentives for people and one which can save them a huge amount of money. The 529 college savings fund is an investment plan for people who do not know how to start a college fund.
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