529 College Savings Plans For the Win

529 College Savings Plans For the WinWhile we don’t have any children of our own yet, we do have several young nieces and nephews. We all live close enough together that every time one of them has a birthday, the whole family gets together for the birthday party.

For us, it usually means rushing out at the last minute to find a gift. We don’t mind giving the gifts, but the reality is that the kids already have so many toys that each new one may only get a minute of attention before they move on to the next one. Possibly never to be touched again.

The kids enjoy the whole process, and that’s what it’s all about, but all in all it feels like kind of a waste. I’ve always felt that there was a better solution, but never gave it much thought except when heading out to find another toy to purchase and doom to its eventual fate of lonliness packed away in toy storage.

A while back, the solution came to me. We’ve always planned to open college savings plans for our children when that time comes, but we had never considered the possibility of doing the same thing for our nieces and nephews.

The more I considered this, the better the idea sounded. It was perfect in just about every way. Here’s some of the benefits I see:

There wont be anymore last minute trips to the store looking for gifts as deposits can simply be transfered from my bank account directly into their college savings account at anytime.

I will no longer feel like I am throwing my money away. Rather than filling their parents’ house with another unused toy, my money will go towards something valuable that I will feel good about.

I will be promoting something that I feel is important. A college education is an necessary step towards success for most people. As they say, the only thing more expensive than going to college is not going to college. Having this fund will help solidify college into their future plans.

They’ll need the money. College is expensive and getting more expensive at a ridiculous pace. I paid for all of my college expenses with savings and by working full time. How great would it have been if an uncle of mine had shown up with a couple thousand dollars to pay for my college? It will be great to be that uncle.

The kids wont miss a thing. Their grandparents already spoil them enough for the rest of us by themselves. The kids wont miss one less present. Sure, they aren’t too excited when we tell them what we are doing, but the appreciation will come later.

our state has a great plan. The plan for our state is consistently ranked as one of the top plans in the nation due to it’s low fees and plan options

There are no minimum deposits, minimum balances, or start up fees, so I don’t have to spend anymore money than I would anyway for birthday and Christmas presents.

It’ll be fun to track the progress. I’m in to that sort of thing, so it will be fun to report to them each year how much money they have in their account. It may even inspire them as far as their financial education is concerned.

As a bonus, there are tax benefits. The earnings are, of course, tax exempt at the federal and state level, but the money deposited into a 529 is also tax deductible at the state level.

For us it’s pretty much a win-win, and all it takes is a little admin time to get things set up. It’s probably something more people should consider.

As they say, the only thing more expensive than going to college is not going to college. Having this fund will help solidify college into their future plans. People who work and go to school must attend schools like that have flexible schedules and night classes, which is not easy.

6 thoughts on “529 College Savings Plans For the Win

  1. Good post. I’ve been thinking of doing this as well. Do you know if I can do this for a nephew that lives in another state? And if so, do I start it in my state or his?


  2. Jeff,
    You can absolutely open an account for your nephew in another state. The money in a 529 plan can be used at any accredited college or university in the country, public or private, graduate or undergraduate, so it doesn’t matter what state you open the account in. However, there are often tax advantages to opening a 529 in your home state. You’ll want to compare your options, because some plans are definitely better than others.

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