Let's break this down
- Two people fall in love
- They get married
- Have a baby
- Add college
- All equals a 529 Plan
Now let's piece that together, when two people fall in love and have a baby it is smart to open up a “529 Plan” for their college education.
With the cost of college rising 5-7% annually, we can expect college to be $250,000 and up in the next 10 years. There has been a major push to try to cut the tuition rise but regardless of what happens, we need to financially ready. This is where a 529 plan helps
A 529 plan works like a typical investment account, but is used for education purposes, typically college; you can use it for anything from room and board to tuition and often laptops or iPad’s now. The rule reads anything that is “required or needed by your academic courses”. So why invest in a 529 Plan rather than the abundance of other investment vehicles out there? Taxes!
With a 529 plan, all your investment is gained tax-free, so that means Uncle Sam will not consume any of the gains that are made in your 529-portfolio. A savings of up to 23.8% on any investment gains (2016), to put it in perspective if your portfolio gained $100,000 in 18 years, you would have to hand over almost $24,000 of that to the government, if this wasn’t inside a 529 Plan, this is the benefit you get for the promise of using it for education purpose.
All you need to start is an opening fee of $1,000 that will remain yours; it is just the minimum to start the portfolio, and set up monthly or bi-monthly deposits into the account. This deposit should be determined by making a financial plan. It is also important to remember that each state offers a different 529 Plan and you do not have to invest in your own states 529 Plan.
So when do you start? RIGHT AWAY! The sooner you set aside your money, the faster your investment will grow through the power of compound; like they say, may the force of compounding be with you! So let's help rid the next generation of this crazy college debt or invest in your own future for grad school.
So, when two people fall in love and think about having a baby, what do you do!? Start a 529 Plan for that little kid and take a lot of burden off of yourself as well as your child. #SmileyFaceEmoji