How to Open a 529 College Savings Plan

A 529 College Savings Plan may help you lower your state taxes!

College tuition has risen rapidly over the past twenty years. It is important to save for your child's or grandchild's education accounts before they are ready to leave for school! The more time you allow the money to grow, the more help you can provide to your child when that first tuition bill arrives. A 529 College Savings Plan is an excellent option to consider for money you want to earmark specifically for college funds. You can fund a 529 College Savings Plan for your children, any of your relatives or even yourself!

Instructions

1. 

   First, determine which 529 College Savings Plan is available in your state by going to the Saving for College website - see resources section at bottom of article for link.

   Look on the right side, middle of the page - there is a yellow map where you can select your state. If you use your "in-state" plan, you may get valuable state tax deductions. Using the in-state plan does not restrict the plan beneficary to only in-state schools.

2. 

   Review the 529 College Savings Plan available for your state. Some states have multiple plans, for example there are 3 plans available in Ohio:

   Ohio CollegeAdvantage - Guaranteed Savings Fund
   Ohio CollegeAdvantage 529 Savings Plan
   Putnam CollegeAdvantage

   Choose the plan that is most suitable in regards to your investment objectives and goals. Many plans have investments that are tailored to your beneficiary's age.

3. Open a 529 College Savings Plan with the provider you feel is best suited for your investment dollars. Please make sure that you understand all costs and fees involved with your college savings account provider. You may wish to speak to a qualified financial advisor about opening the account for you.

4. 

   Fund the account and make sure to keep records of your contributions. Be certain to provide your tax provider with contribution information, as some states provide generous tax deductions.

5. 

   Please be aware that you are eligible to change the beneficiary on a 529 College Savings Plan. As an example, you have $50,000 saved for your son, but he only needs $30,000 for college. You could then change the beneficiary to your daughter who might be going to college in a few years.

6. The gift of education is priceless but the cost of education can be very expensive! Make sure to keep your eyes and ears open for scholarship opportunities for your child.

Tips & Warnings

• Be certain to read and understand the restrictions on 529 accounts, mostly understand that the Custodian is the owner of the funds, not the beneficiary (child). Also, understand that the funds must be used for higher education purposes or else penalties/taxes may apply!

Resources

• Saving for College Website