A few months ago, you enrolled your child in kindergarten. For a few days, you struggled with the realization that your kid is growing up. Then, you immediately began to worry about future educational expenses, primarily college tuition. If this scenario sounds familiar, you should consider investing in a 529 plan. If you aren't familiar with college savings plans, the following 529 Plans comparison will help you decide on the best option to secure your kid’s future.
College Savings Plan
College savings plans allow you to set up an account for your child. During this process, you will have the opportunity to select the type of investments you want your money to go into. For example, you may be allowed to invest your cash in money market funds, bond mutual funds, or stock mutual funds. Unfortunately, your investments will not be guaranteed. Therefore, your account might increase or decrease in value from year to year.
Of the three aforementioned investment choices, money market funds are generally the options that carry the lowest risk. Because of the safe nature of these investments, the return is often low. Some college savings plans give you the option to invest in higher risk securities when your child is young, then, as your kid nears college age, your group of investments is automatically switched to lower risk securities. This decreases the chance that your account will lose money just before you need it to pay for college costs.
Enrollment opportunities are available year round and college savings plans don’t have age restrictions for the beneficiary of the account. Do you want to enroll in college when your kids are older? If this is your goal, you might be interested in opening a college savings plan for yourself. This type of 529 plan can be used to pay for all qualified post-secondary educational expenses. These expenses include tuition, required fees, room and board, and required books and computers.
Prepaid Tuition Plan
If you are ready to purchase future college credits at a specific educational institution for upcoming expenses, a prepaid tuition plan is your best choice. Prepaid tuition plans only allow you to pay for tuition and required fees. Your state may allow you to add a room and board option onto your plan at an additional cost. This type of 529 plan is usually offered by state governments, so you do have to be a resident of the same state as the university you or your child is planning to attend. Since they're from the state government, they're guaranteed. This means that, unlike college savings plans, you won’t have to worry about your account declining in value. Perhaps the biggest benefit is that since you've already paid for the credits, no matter what happens to tuition costs in future years, your cost won't go up.
For many families, the mere thought of future college expenses is overwhelming. However, with the right savings plan, you can be fully prepared when the proud moment arrives for your kid to enter college. 529 plans are viable college saving options. It’s never too early to start saving for this momentous time in your child’s life.