The Money Coach
  • About
    • Meet Lynnette
    • Media Kit
  • Contact
  • Subscribe
  • QR Code
  • Books
  • Categories
  • Coaching
  • Hire Lynnette
  • Money Coach University™
  • The Money Coach Recommends™
No Result
View All Result
The Money Coach
  • About
    • Meet Lynnette
    • Media Kit
  • Contact
  • Subscribe
  • QR Code
No Result
View All Result
The Money Coach
No Result
View All Result

The 529 College Savings Plan Explained

Lynnette Khalfani-Cox, The Money Coach by Lynnette Khalfani-Cox, The Money Coach
in Paying for College
Reading Time: 3 mins read
529 plan
8
SHARES
126
VIEWS
Share on FacebookShare on TwitterShare on LinkedIn

One of my lucky readers just got $5,000 from a family member — not for her, but for her young daughter’s college education.

Her question: what to do with it? My answer: Put it in a 529 Plan.

A 529 Plan is a state-sponsored college savings program. In my opinion, these are hands-down the single best way to save for a college education.

Here’s how a 529 plan works. You basically put money into the plan and it’s invested in mutual funds. The mutual funds are managed by professional investment advisers who are selected by the state.

A 529 plan is offered by every state in the country, and you can pick any one; it doesn’t have to be a 529 plan from the state in which you live. For example, in our case, we live in NJ, but we picked the New York plan for our 3 children because we think it’s a very good one.

Some highlights to know:

The money you put into a 529 plan grows tax-free

All the money comes out tax-free as long as it’s later used for higher education (i.e. tuition, room/board, lab fees, books, supplies, etc).

Money in a 529 plan is portable — meaning your daughter can take it with her and use it any any college in the country (it doesn’t have to be a college in her state, or in the state in which the 529 plan was set up)

Money in a 529 plan is transferable. Let’s say your daughter decides not to go to college (fingers crossed; that won’t happen!). But assume she doesn’t for whatever reason.

If you have another child, you can transfer the money in the 529 plan to him, so that he can use it for college. Even if you or your husband decide to go back to school, you could use the money to pay for your expenses.

With a 529 plan, the money is controlled by you (the donor), and is counted (for financial aid purposes and tax purposes) as an asset in your name; your daughter is listed as the beneficiary. This can help in three ways:

First of all, because you control the money, she can’t just have it when she’s 18 or 21 (the legal “age of majority” in most states).

With some funds, like trusts, when a young person turns 18 or 21, they can essentially tell mom & dad “I want a new car” or “I want to travel and find myself” and then proceed to blow their college savings on those things… and there’s nothing the parent can do, because legally the money belongs to the child. That’s not the case with 529 plans.

Also, since the asset is in your name, that can help with student financial aid down the line when your daughter does go to college. All schools look at your families finances, and determine something called your EFC, or Expected Family Contribution.

In the simplest terms, that’s the amount of money they expect you/your family to put toward paying for college. (Then the school offers other aid, like scholarships, grants, work study, loans, etc.).

Well, in determining your EFC, many colleges will count 20% of an asset owned by a child/student in the calculation for the EFC. However, only 12% of an asset owned by the parent counts toward the EFC. Again, each school is different. But this is a general guideline.

Thirdly, many states offer a tax break to you, as the donor, for making a 529 contribution.

Same deal applies for grandparents and others who contribute.Tax benefits vary, of course, based on factors such as amount contributed, income, age, and marital status.

For more info on 529 plans, visit this website: http://www.savingforcollege.com/

And remember, if you have a child: it’s never too early to start saving for college!

Tags: 529 PlansKids and MoneySaving For College
Previous Post

How to Best Dispute a Medical Debt

Next Post

What To Do When You Are a Victim of Identity Theft

Related Posts

The High Cost of Test Prep and the PSAT Exam

by Lynnette Khalfani-Cox, The Money Coach

Here’s my daughter, Alexis, studying for the PSAT. As with all 3 of my kids, I was her tutor, using my knowledge + study guides. Private test prep? Kaplan: up to $1,300, for unlimited hours online. Princeton Review: up to $2,700, for 18 hrs. So I saved money, and spent...

What to Do If You Can No Longer Afford to Pay for College Due to COVID-19

by Lynnette Khalfani-Cox, The Money Coach

If you are struggling to pay for college due to COVID-19, all hope is not lost. There are steps you can take to still pay for college: 

college tuition

4 Hidden College Costs Every Parent and Student Should Know

by Lynnette Khalfani-Cox, The Money Coach

Like most parents of high school teenagers and college students, this is the time of year when my husband and I start focusing a lot more seriously on higher education expenses. Thankfully, when our oldest daughter went off to college, she initially won a ton of scholarships. She’ll turn 20...

college visits

3 Ways College Visits Help With Admissions, College Selection and Finances

by Lynnette Khalfani-Cox, The Money Coach

Every year, millions of students across America never get to go on college tours and college visits – and preview the schools to which they’re applying – mainly because it can be costly and time-consuming to make a college road trip. Nonetheless, college bound teenagers, transfer students and parents should...

College Scholarships for Adults

by Lynnette Khalfani-Cox, The Money Coach

Q: I am 44 year old veteran who would like to attend college where are the grants, scholarships, etc for older adults? I have had no luck in locating any. Everyone wanting to obtain a higher education is not a high school junior or senior! A: Thanks for reaching out...

Winning College Scholarships

Winning College Scholarships Video Course – Free Preview

by Lynnette Khalfani-Cox, The Money Coach

If you or someone you know could use scholarships or grants to help pay for college, I have great news! I’ve just launched my first video course via Udemy, an online learning platform – and the debut course is called Winning College Scholarships: 10 Secrets to Earning $500,000 or More...

college textbook costs

Why It’s Never Too Early or Too Late to Win College Scholarships

by Lynnette Khalfani-Cox, The Money Coach

College scholarships aren’t just awarded to high school seniors planning to enroll as freshmen in the college or university of their choice. Anyone, of almost any age, can win a scholarship or grant – netting the recipient free money for college. Here’s a snapshot of college scholarships and cash awards...

Load More

Popular Posts

  • Car repair

    What to Do If You Can’t Afford a Car Repair Bill

    1376 shares
    Share 550 Tweet 344
  • What to Do if Your Spouse Stole Money From You

    1165 shares
    Share 466 Tweet 291
  • What to Do If You Can’t Afford to Leave Your Spouse

    1102 shares
    Share 441 Tweet 276
  • Here’s Why I Pay My Kids For Good Grades (And Maybe You Should Too)

    1008 shares
    Share 403 Tweet 252
  • What Do All Those Strange Codes In My Credit Report Mean?

    813 shares
    Share 325 Tweet 203
  • Do This Now If Your Wages Were Not Reported

    743 shares
    Share 297 Tweet 186
  • How to Find Out if a Debt Collector is Licensed to Collect Your Debt

    722 shares
    Share 289 Tweet 181

All information on this blog is for educational purposes only. Lynnette Khalfani-Cox, The Money Coach, is not a certified financial planner, registered investment adviser, or attorney. If you need specialty financial, investment or legal advice, please consult the appropriate professional. Advertising Disclosure: This site may accept advertising, affiliate payments or other forms of compensation from companies mentioned in articles. This compensation may impact how and where products and companies appear on this site. AskTheMoneyCoach™ and Lynnette Khalfani-Cox, The Money Coach® are trademarks of TheMoneyCoach.net, LLC.

©2009-2023 TheMoneyCoach.net, LLC. All Rights Reserved.

RSS / Sitemap /Submit an Article / Privacy Policy / LynnetteKhalfaniCox.com

No Result
View All Result
  • Books
  • Categories
  • Contact Lynnette
  • Get Coaching
  • Hire Lynnette
  • Money Coach University™
  • The Money Coach Recommends™
  • Home
  • Subscribe to Newsletter
  • QR Code

©2009-2021 TheMoneyCoach.net, LLC. All Rights Reserved.

Welcome Back!

Login to your account below

Forgotten Password?

Retrieve your password

Please enter your username or email address to reset your password.

Log In

Add New Playlist