The Perfect ‘10’
We know there are skeptics out there. We see you. The ones who scoff at the idea of taking as little as $10 – and about 10 minutes – to open a 529 college savings plan.
“Really? I can open a college savings account for my daughter in just about 10 minutes? And I can start with as little as $10 with some plans?”
But first, let’s address the ‘why?’
Before you jump in and open an account, it’s fair to wonder why. Why would you want to open a 529 account for your child?
If you plan to send your child to college, there are lots of reasons, but here are three:
- With 44 million Americans owing more than $1.5 trillion in student loan debt, it’s time to stop adding to the burden on young Americans. That means, it’s time to start a smart savings account.
- Recent college graduates who are paying back student loans are putting off buying homes and cars and waiting to start families because they feel they can’t afford those things as long as they are paying off their student loan debt.
- Because a 529 college savings plan is one of the best ways to save – in addition to the beneficial tax incentives, nearly every state has a 529 plan. The convenience factor is off the charts.
So that’s the “why” a 529 college savings plan. Opening a 529 account can help your child avoid putting off life choices; it can be one way to help ensure your child doesn’t become part of student debt crisis; and it’s one of the smartest ways to save for college.
Ready to begin?
Begin is the key word here. Whether it’s $10, or $50, or $100, the point is to open a 529 college savings plan and start saving for your child’s future education.
Now … got 10 minutes?
In many cases, that’s all it takes to set up a 529 account online. Literally, we tried it. Twice. The first time, it took 9 minutes and 13 seconds. The second time, we used our already-established user account and opened a new 529 plan account for a second child in the family. It took 3 minutes and 10 seconds to open the second account, and in each instance we started with $10,* which was deposited directly from a basic checking account.
Next came a rewarding and extremely satisfying message:
Welcome, College Saver!
You’re on your way to saving for higher education
Remember, nearly every state has a 529 plan. Some states offer additional tax incentives for residents who open a 529 account in their home state, so that’s something to consider when choosing your 529 account.
Another consideration when opening a 529 account is what type of investment options you will choose. Going into the sign-up process, we chose a 529 savings plan and knew we wanted to open an account with an age-based investment option. Many call this a “set it and forget it” investment option. You simply select the age-based or year of enrollment option, depending on the plan that corresponds to your student’s age or year expected to start school. With this type of option, the plan automatically moves your money to a more conservative mix of investments as you get closer to the date you’ll start to withdraw from your account to pay for college.
According to CollegeSavings.org, this is one of the most popular investment options for 529 plans, so that is what we chose for this example.
To give you an idea on how a 529 account can grow, consider this scenario:
- Beginning the day your child is born, say you average investing $10 per week, every week ($520 per year), for the next 18 years.
- That $9,360 can grow to $15,133* in a 529 college savings plan. (You can estimate how much your investment might grow by using the 529 savings calculator here.)
This shows how even saving a little can grow into a lot and it doesn’t even account for the many additional contributions that can be made for birthdays, holidays and other celebrations by family and friends. And any amount saved will help your college-bound student.
If you’re ready to begin saving for your child’s future education, here’s what you’ll need.*
- An initial contribution. Again, that can be $10 or a higher amount depending on the plan. The minimum amount needed to open an account in several states is $10, so we chose that as our initial contribution. In some states, you can open an account with $0. Generally, you can use your 529 plan savings account at any college, university, trade school or other post-secondary educational institution eligible to participate in a student aid program run by the U.S. Department of Education. This includes most accredited public, nonprofit and privately owned for-profit postsecondary institutions, as well as some schools abroad.
- The checking or savings account number and routing number from which the initial contribution will come.
- Your Social Security number and the beneficiary’s (future student’s) Social Security number. You can also name a successor account owner who will take over the account should the account owner pass away while the account is open. If you do name a successor, make sure you have their Social Security number as well.
- Mailing address for the account owner (you), the beneficiary (future college student) and the successor account owner.
- About 10 minutes (or less, in our case).
Once you have these materials ready, the College Savings Plans Network site, where you can compare plans by state and learn more about specific plans. Again, some states offer additional tax incentives for residents who open a 529 account in their home state, so it’s always a good idea to start with your own state’s plan first when choosing your 529 account.
If you know the state in which you want to open your 529 account, click on it. From there, you can start your journey to opening your college savings account. Look for the button on each state’s 529 website that says Enroll or Open an Account.
When you’re done, give yourself a high-five! You’ve joined a movement that just grew a little bigger.
Before investing in any state’s 529 plan, you should consider whether your or the beneficiary’s home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in that state’s qualified tuition program. You should also consult your financial, tax, or other advisor to learn more about how state-based benefits (or any limitations) would apply to your specific circumstances.
Account owners should periodically assess, and if appropriate, adjust their investment choices with their time horizon, risk tolerance and investment objectives in mind.
Investing is an important decision. Please read all 529 plan offering materials in their entirety before making an investment decision.