Introducing 529 Accounts. A Highly Effective Way To Save For College

Today, college education is nearly always costly. Statistics show that costs have risen faster than the rate of inflation over the last 3 years. Going to college can often be a matter of privilege for those on low incomes who can just about feed their families. However, there may be a way out for people who want to gain a university degree without gaining massive debt in the process – a 529 account for college savings.

Getting a 529 account may just be the best way for anyone who wants to prepare for a college education funding in an economical way. This is a scheme wherein parents or guardians can get a prepaid college tuition plan for their children or wards in an affordable manner and without having to pay for the capital gains taxes. You can choose from a 529 Prepaid Tuition Plan or another type which is known as the 529 Qualified Tuition Plan. There are other options for parents like the Coverdell Education Savings Account – a savings plan can be used for both elementary and high school or secondary expenses as well as for college tuition fee.

However, what is advantageous about the 529 College Savings Accounts is that generally, you need not concern yourself with restrictions on residency. (There is a provision in few states that both the contributor and the account beneficiary live in the state where the account was made).

Another big advantage of a 529 account is that you do not have to pay for federal taxes even if you are gaining substantial interest.

So how does the 529 account work? This is a prepaid college tuition fee meaning you can pay for your child’s education years before he starts college. You have to research on which type of accounts you want to get because the prepaid plan is restricted to selected schools, while the 529 college savings plan is more flexible and thus more ideal.

So to which expenses can you apply your 529 savings account? This can be used to finance education costs like college tuition fee, boarding expenses, books, school supplies and other school fees. It is best to get the plan when the child is still very young because vendors offer more aggressive benefits in such plans compared to the conservative investment plans they provide for those who are about to enter college.

If you already have a 529 account then you are assured that you do not have to pay federal taxes for withdrawals up to the year 2010. After that, the US Congress can decide to extend the tax-free feature or take the alternative route.

If you want to build a college savings fund the easy way then the best choice for now is the 529 account. But you have to know which one is the right account for you before you invest your money. You will be able to choose the best option for you and your child if you are aware of the intricacies of 529 accounts schemes before signing on the dotted line.