529 Plans – An Ideal Way To Pay For College Expenses
Investing in a 529 plan is an ideal way to pay for college expenses.
When you are raising small children, no expense on their behalf can seem too dear. Diapers, doctors, time off from work, and family vacations will all take their toll on your moneybags. In the midst of all the excitement, challenge, and heartbreak of raising a family, don't forget that there are expenses to come that you may not be ready for if you are living solely in the present.
A college education doesn't come free in America, and it's not cheap either. When the time comes to cut the umbilical cord and send your little ducklings soaring away from the nest, you will have enough to worry about without the burden of student loans. No parent wants to send her or his child out into the world only to be left at home with a pile of debt, or, worse yet, to pass that burden directly to an eighteen-year-old child.
Since 1996, every state has been operating qualified tuition programs, better known as 529 plans. A 529 plan is a state-run, tax-free savings program that allows you to put money away for your children's future college expenses. They are designed to make whatever income you deposit into them exempt from federal income tax. Not only does investing in a 529 plan allow you to reduce the taxes you normally would have to pay on your annual income, but it helps you reserve funds for the future.
529 plan regulations will differ from state to state, and many states offer both 529 prepaid tuition plans and 529 college savings plans. 529 prepaid tuition plans allow you to invest directly in your child's future tuition at your state's public colleges. 529 college savings plans allow you to use the funds you put away to pay your child's expenses in any college. These types of plans allow more freedom in that funds can be withdrawn from them to pay for expenses in any college, and can be started up to fifteen years before you and your child are even considering which college to choose.
No matter what type of 529 plan you choose, planning for college expenses will help you face the future ready for whatever new challenges it brings.