Celebrate National 529 Day with These Savings Tips!
Celebrate National 529 Day with These Savings Tips!
- min read
If your family is talking about how to save for future education expenses, May 29th is a day worth marking on your calendar.
During the month of May, we celebrate National 529 Education Savings Plan Day, a day devoted to raising awareness of tax-advantaged 529 plans, an option added to the tax code in 1996 that makes investing for future education more appealing.
Ways to Simplify 529 Savings and Build Better Habits
Saving money can be challenging. Budgeting and saving for your children’s future education can seem difficult for all families, including young couples or single parents.
However, saving for future education may not be as hard as you think! With a 529 education savings account with The Education Plan®, you can enlist help from friends and family in your child’s life who may want to pitch in. It’s a way of “crowd-funding” education and can help grow your child’s account, and it’s so much more meaningful than a gift card or toys. One of the best pieces of advice for parents saving for future education is to think outside of the box, changing the idea of “presents and gifts” by encouraging contributions from loved ones. And, once they’re old enough, even the kids themselves.
Family and friends can give a gift contribution to a 529 account(s) through a one-time gift or a recurring contribution.
Here are three ways you (and your kids) can make the most of education savings and even trim future education costs:
- Be Tax Savvy. Contributing to a 529 plan is a potential great way to get more from a tax refund or reduce your tax burden. If you’re expecting or have already received a refund this tax season, why not invest it in your child’s 529 plan before you spend it? Better still, in many states, you can deduct contributions to a 529 account from your state income taxes. In New Mexico, you can deduct 100% of contributions to an account with the Education Plan from your state income taxes if the funds are used for qualified expenses. Learn more about this win-win proposition here.
- Ask, and You Shall Receive. Casting a wide net for family members and friends doesn’t have to be awkward. Here’s a clever idea shared by SLM Corporation (better known as Sallie Mae). For birthdays, holidays, and graduation from grade school, junior high, and high school, ask friends and family members to contribute toward education savings rather than the usual toys, games, music, or gift cards. Use social media. When your child makes the honor roll or wins a prize, create a Facebook fundraiser with an attainable goal and channel those funds into your 529 account. (You could even make a goal of $529!)
- Encourage older kids to start pitching in! By junior high, your teen should know future education will not be cheap–far steeper than it was for their parents. Encourage them to play an active role in building their future and reduce the burden for future education expenses. Give them a few ideas on ways they can invest in their own future. They can:
- Find summer jobs or part-time positions during the school year that don’t take too much time away from their homework or activities.
- Take AP and Community College Classes while still in high school where possible. Another option for reducing the cost of a four-year college education is for students to earn college credits through Advanced Placement classes in high school or by taking low-cost community college courses, most of which will transfer to a four-year university.
- Trim expensive senior year perks. Once your kids are empowered to help save for education, consider gently implementing an “austerity plan” during their last few high school years. Between portraits, prom tuxes and gowns, limo rentals, graduation parties, spring break, week-long senior trips, and dozens of other large and small expenses, parents can spend thousands on their kid’s senior year. Encourage them to be thoughtful about extra expenses and possibly cut back on some of these trips.
The Undeniable Benefits of Time, Consistency, and Compounded Growth
Of all the ways to save for your child’s future education, perhaps one of the most important is early dedication—begin saving as early as possible and invest consistently over the long term.
The power of compounding can potentially transform consistent monthly and even annual deposits into a substantial education fund. Consider this example: Though results may vary, if you begin saving when a child is born and regularly invest just $25 a month in a tax-advantaged 529 plan, you could accumulate $8,730 in the account by the time your child turns age 18. In this savings scenario, you would contribute $5,400, enjoy an annual rate of 5%, and accumulate an extra $3,330 thanks to the benefits of compounded growth.
If you haven’t opened an account yet, celebrate 529 Education Savings Plan Day by opening a tax-advantaged account with The Education Plan today. If you already have an account with The Education Plan, consider making an additional contribution in honor of 529 day. Remember, it’s never too early or too late to start saving.