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Should You Invest in 529 College Savings Plans?

Aug 18, 2007
With the growing popularity of 529 College Savings Plans, also known as Qualified Tuition Programs, many parents are asking themselves whether they should go ahead with this investment program for their kids' college education or not. A 529 College Savings Plan is a provision in the United States of America, started in 1996, which allows parents to invest in a monthly basis for their children's future educational needs, especially when they are in college. It is advisable to start early with these investments. The earlier the investment is started, the smaller will be the sum of money required to be put into the fund each month.

The 529 College Savings Plan is applicable for as many as 8,000 US schools and colleges and 800 foreign institutions. That makes it one of the most wide-reaching plans for educational investment in the US. The advantage to parents here is that they can choose whichever school or college for their children - and also various foreign institutions - without worrying whether the plan will pay out for their expenses or not.

The 529 College Savings Plan is wonderfully designed to meet all the educational requirements of collegiate students, though the most intentional investment is of course for the college tuition fees. With college tuition fees touching a high of $20,000 per year, the plan is a boon to most parents, who can give their kids a better and longer college education. Also, the plan is adjusted for future inflation. This means, as the prices of the college fees will go up in future, the amount paid out by the plan will also increase. The plan can be bought at present rates, but when the student begins college education, it will pay out at the future inflated rates.

Apart from college tuition fees, 529 College Savings Plans can also be withdrawn to fund other college requirements such as food and lodging, books and education material and paying all kinds of utility bills. Though, there is a 10% tax levied for withdrawing this fund for non-educational purposes.

Speaking of taxes, the 529 College Savings Plans are free from all kinds of federal taxes, and even state taxes are not levied in most circumstances. If you are a grandparent making an investment for your grandchild through the 529 College Savings Plan, you are allowed to sign off this amount from your total estate. Also, generally, the amount paid for the 529 College Savings Plan is tax-deductible.

There are apparently no disadvantages of the 529 College Savings Plan, which has been carefully scrutinized by financial experts. Since it is a relatively recent plan, all the problems of the current economy are already taken into account, and the plan is almost error-free. As such, it is an exceedingly good idea to go ahead with such an investment for your child, as you cannot guarantee how you will be financially placed a decade later when your child's college education will probably begin. Also, the sooner you begin, the better.
About the Author
Want your kids to work at McDonald's forever? Better save for college. Kip D Goldhammer owns and operates http://www.529planz.com 529 College Funds
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