We all know college is expensive. In 2019, the average sticker price of an in-state public college education was $10,116, while private colleges average a whopping $36,801. With the ever-increasing price of sending kids to college, more parents than ever feel the need to find ways to save for their children's college expenses.

529 college savings plans' popularity and growth have continued to rise since their creation under the Small Business Protection Act of 1996, but studies still show that most Americans still don't know what a 529 savings plan is. We break down the basic pros and cons of 529 plans, giving you a better understanding of how they work and if they may be the right college savings vehicle for your kids.

What Is a 529 College Savings Plan?

529 plans are tax-advantaged investment accounts that are state or state agency run to save for college expenses.

There are no income, age, or contribution limits to 529 savings plans. You don't have to worry if the account beneficiary doesn't go to college right away; they can use it whenever! Additionally, the beneficiary of the plan can be changed to another family member. This means that, as the account owner, you can transfer it to another family member, including yourself! Parents can feel better about staying in control of the money, too. Unlike UGMA (Uniform Gift to Minors Act) and UTMA (Uniform Transfer to Minors Act) accounts, the custodian of a 529 savings plan always stays the owner; it will never switch over to the control of the beneficiary. This means parents can rest assured that their child can't withdraw the money to purchase the Mustang they've been eyeing!

The most obvious disadvantage to 529 plans is that you are limited to withdrawing the money only for college expenses. If withdrawn for any other reason, you may be subject to income tax along with penalty expenses on the earning portions of the account. Luckily, the list of qualified college expenses is vast, including the most recent addition to the list: student loan payments.Since 529 plans are run by states and institutional agencies, a big concern is whether or not the plan that is opened will transfer easily if the beneficiary ends up going to college out of state. In most 529 plans, your choice of college is not affected by the state in which it was opened.


Tax Benefits

Most states offer a full or partial tax deduction for 529 contributions. Some states even allow a tax credit for the contributions. Account owners can also feel better knowing that the earnings grow tax-free and will never be taxed as long as the money is used for qualified expenses.

Investments

Most plans are low maintenance and have automatic investment management options, which means less work and worry on your end. Many 529 plans use target-date funds, which change based on the beneficiary's age and become more conservative the closer they get to college age. These types of funds can be great for the account owner, who wants to be able to "set it and forget it." but it can also be troublesome for those more involved with managing their own investments. Account owners can only make investment changes twice a year in 529 accounts (there is a loophole for this if you switch the beneficiary; then the investment change limit is reset)

529 Plans' Effect on Financial Aid

There is much debate over how a 529 plan can affect a college applicant's ability to receive financial aid. A lot of factors go into the decision-making on FASFA (free application for federal student aid) forms, so it's important to look into each individual case. Since student assets are assessed at higher rates than parents', in most cases it is best to keep the account in the parent's name. However, 529 accounts owned by a grandparent will be counted on the FASFA application as the student's assets, so it will be assessed at a higher percentage.

In my personal opinion, as a former personal banker and mother of two, 529 plans are the best way to save for college, as long as you start early– it doesn't make much sense to open one if your child will be attending college in just a few short years. The best advice I can give people is to act early, set clear goals for the future, and meet with a financial professional to discuss your exact situation.

PayPath
Follow Us on

Airbnb is a great option while traveling, but you should protect yourself from damage charges from unscrupulous hosts.

Airbnb offers an affordable option for people looking to be more comfortable as they travel.

However, there are downsides to staying in a host's home rather than a hotel. Whereas hotels are designed for constant streams of visitors and often have furniture built to last, at an Airbnb, you may be staying on old or cheap furniture that a host is using in order to maximize their profits.

And while most reputable hotels will have regular room inspections from staff to check for any wear and tear, Airbnb damage disputes are oftentimes he said, she said situations. If you are in an Airbnb and something breaks, there are a few steps you should take in order to ensure that you are not on the hook for damages out of your control.

Keep reading Show less

What Are NFTs?

Art Installation N°1 by Carlos Marcial. Rhett Dashwood / YouTube

If you're keeping tabs on the art and tech worlds, you've probably been hearing whispers about "NFTs" for the past month. Just over the past week they've entered the mainstream lexicon.

Twitter founder Jack Dorsey made the news for selling his first ever tweet. The app has been teasing paid subscription models and newsletter-like features, but tweets for sale is "the next frontier."

The 2006 tweet went up for auction as an NFT, and the current bid is $2.5 Million. But what does it mean to own that? Why would anyone want to? And what even is an NFT?

Keep reading Show less

Long gone are the days when the majority of Americans dreamed about owning a home with a white picket fence.

The traditional American Dream may be on its deathbed, but that doesn't mean a core component of the vision can't survive. It simply takes a diverse perspective. People can still believe they can attain their own vision of success in society with hard work, knowledge, and risk-taking. Investing in today's American Dream may literally mean investing money in our modern economy, starting with our infrastructure.

Real estate investing in particular is a lucrative method that can boost income and secure a better financial future for many. There's always risk involved, but the payoffs can far outweigh the uncertainty. Selecting solid financial investments is about confidence and competence. If you're looking for some advice on this kind of investment, here are a few savvy tips for new real estate investors.

Stick To a Specific Strategy or Niche

Real estate is a challenging sphere of the business world, one that requires several key skills: groundwork knowledge, networking, perseverance, and organization. True knowledge of the real estate market will come with time and experience, but it's a smart idea to select one area of the market and stick to it. This is the best way to attain in-depth familiarity with your specific niche.

First, choose a geographical area close by and then a niche strategy within it, such as house flips, rental rehabs, or residential or commercial properties. By doing so, you can become aware of current inner working conditions in the market and you'll have a better idea of how these trends may change in the future.

Be Vigilant About Viable Financing Options

While it takes money to make money, you don't have to use all your own money. A common misconception about real estate investing is that you must be wealthy to start off. This isn't straight fact, however. A majority of people can test the waters of real estate investing without a lot of initial cash in their pocket.

Aside from traditional financing options from banks and institutions, private lending options can be worthy solutions. Hard money lenders are popular, reasonable choices, and they tend to have fewer qualification requirements upfront. However, be sure to strategically choose a hard money lender to find the best possible fit.

Master the Art of Finding Good Deals

There may be hundreds of thousands of available properties for sale on the current market, but the bulk of them will never amount to the final money-making result you desire. Another great tip for new real estate investors is to use good math to estimate profit. Taking risks is part of the process, but you have the ability to analyze properties and use networking sources to find the greatest deal. You can't win every deal, but you can steadily work towards a thriving financial future.