What You Need to Know About College Savings Plans

- min read

As a parent, saving for your child's college education can be a daunting task. With the rising cost of tuition, it's important to start planning early and explore all your options.

When it comes to college savings plans, 529 accounts are helpful tools to maximize savings and grow funds over time. According to the College Savings Foundation (CSF), 529 plans are the top choice for saving for education. A growing number of families have turned to 529 plans to prepare for the mounting costs of education. In 2021, 529 accounts had over $480 billion in assets and there are nearly 16 million 529 account holders across the nation, according to College Savings Plans Network (CSPN).

A 529 plan is a tax-advantaged education savings plan designed specifically for education expenses. It's named after Section 529 of the Internal Revenue Code, which was created in 1996 to encourage families to save for college. The Education Plan® is New Mexico’s official 529 education savings plan. Individuals from any state and US territory can open an account with The Education Plan.

One of the main benefits of a 529 education savings plan is that the funds in the account can grow tax-free. This means that any earnings on your investments in a 529 account are not subject to federal income tax, and in some cases, state income tax when funds are used to pay for qualified education expenses. Additionally, many states offer tax deductions or credits for contributions made to a 529 plan. In New Mexico, 100 percent of contributions can be deducted from your state income tax when funds are used for qualified expenses.

Review Qualified Expenses

Another advantage of a 529 plan is flexibility. You likely don’t know what educational path your child or grandchild will take. With a 529 plan, that’s okay. The funds can be used for a variety of qualified educational expenses, including tuition, fees, books, room and board, and computer equipment. You can also use the funds for any eligible education institution, including trade schools, community colleges, and universities and even some institutions abroad.

When it comes to college savings, contributions can really add up. With a 529 education savings plan you can effectively crowd source college savings. Anyone can open or contribute to a plan, including grandparents, aunts, uncles, and friends. The Education Plan makes this even easier with Ugift. The program allows you to create a simple code that you can share with friends and family. They use the code to send a gift directly into the 529 account. There are even gift certificates they can print out to make the gift feel special.

Start Saving for Your Child's Future Today

Overall, a 529 education savings plan with The Education Plan can be a valuable tool for saving for your child's future education. It offers tax benefits, flexibility, and the potential for tax-free growth. With careful planning and savings, you can help provide your child with the education they need to succeed.