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Higher Education for The Kids - What is a 529 Plan?

Every parent wishes to see their children go to a college or a university to complete their studies. It is very typical for parents to think of their children's educational future, at the same time keeping their children's interest at heart as this can play a big role in deciding whether it is needed to have an educational plan for them. There are many plans to choose from out there, and 529 Plan is one of them. Considered as the simplest way to save up for the child's college fund, what is a 529 plan?

Legally known as 'qualified tuition plan', the 529 plan is savings system that is tax-advantaged. This is sponsored by states, agencies of the states, and a number of educational institutions and is a state-sponsored investment program conceived in 1996. Two types of these plans are available: pre paid tuition plans and college savings plans. The difference? Pre-paid tuition plans allow prospective participants to acquire and purchase just units or credits at eligible institutions for the children's future tuition. This can even include a child's room and board, if ever they decide to stay at their institutions. College savings plans, on the other hand, permit the establishment of an account for the child for the purpose of paying the child's college expenses. If one chooses either option, the investment will still grow to meet cost needed for the child's college education. It is up to the parent to decide which option would be the best for them and their child. It just only varies from state to state.

The benefits that come with this type of educational plan are very attractive. No taxes will be paid on the account's earnings over time. Only the parent has the power to access the account and control it, and in no way would it be accessible to the child. In the event that the child decides to not pursue their college education, the 529 plan can be passed on to another family member, even to the parents themselves. Anyone can also have their contribution to the account, and there is no income limitations that can hinder someone to have a 529 plan account. Most states that offer this account also have no age limit as to when a child can take advantage of the account. Scholarship can also mean well for the planholders, as they can withdraw the amount saved without penalty in case this happens. These benefits are important to know when deciphering and understanding what is a 529 plan.

If a parent should decide to invest in a 529 plan, they should firstly consider their financial situation. Is their children's college education a fit for their financial goals? Are there other financial matters that need more attention than the college education? If decided, find out if the plan is available in the state location. Do the research on what steps are best to follow when planning out the 529 plan. Parents would be quick to learn that investing in a 529 account plan maybe one of the best decisions they will make for themselves and their children.