3 Helpful Tips For Choosing A 529 College Savings Plan

One of the best ways to build wealth over time is to invest. Investing can help you amass wealth at a faster rate than you would likely be able to otherwise. This holds true whether you are saving for retirement, or whether you are saving up for college.

If you are looking for a way to increase your chances of helping your child pay for college, you can use a 529 college savings plan to set money aside. While there is the risk of loss, there is also the potential to build up some wealth — especially if you start relatively early.

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Five years ago, I opened a 529 account for my 10-year-old son. I contribute monthly, and it has been gratifying to watch the account grow over time. By the time he uses the account, when he is 20, there will be 15 years worth of savings and growing with the power of compound interest.

As you consider your 529 plan options, here are three things to keep in mind:

tips 529  college savings

1. Choose a Plan that is Versatile

Look for a plan that is fairly versatile in terms of where you can use the money. Most 529 plans are set up by states. However, just because a 529 college savings plan is set up by a particular state, it doesn’t meant that you have to attend school in that state. Many plans allow you to contribute if you live out of state, and you can also use the money to pay expenses at thousands of educational institutions across the country.

Make sure that the plan you choose is versatile, so that your child has more options when it comes to deciding which school to attend. Look for a versatile plan, with fewer restrictions.

2. Look for a Variety of Investment Options

One of the reasons I like the 529 plan I use for my son is that there were a number of investment options to choose from. The plan offered a number of index funds and ETFs. Some plans only offer a few investment options, so you are limited. This can be very disappointing, especially if there is a particular fund that you are interested in. Choose a 529 plan with a variety of investment options that fit your needs. Simple investments, like index funds and ETFs, can give you a big advantage, while offering a degree of diversity, and a lower risk. Don’t choose a plan that limits you to investments that you aren’t thrilled about.

3. Avoid Plans with High Fees

Just as costs are coming down for various funds, it’s also possible to find 529 plans with low fees. Compare the fees charged by different plans. The higher the fees, the lower your real returns. While you can’t completely avoid fees, you can reduce what you pay in fees. You can save on fees when you choose low-cost ETFs and index funds for your 529 plan. Before you commit, look at the fee schedule so that you understand what you will pay for the privilege of investing.

Chances are that you can find a 529 plan that offers you versatility, various investment options, and low fees. Many states are trying to make their plans attractive to investors, and that is to your advantage. Do your homework, and you will be more likely to find a solid 529 for your child’s college education money.

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Miranda is a freelance writer and professional blogger. She writes for a number of personal finance blogs, including Planting Money Seeds. She has a M.A. in journalism, and is the author of Confessions of a Professional Blogger. Miranda lives Utah, where she enjoys spending her free time reading, traveling and playing with her son and husband.

Last Edited: 7th November 2012


    Share Your Thoughts:

  1. says

    529’s are great! Even better if you link them to a online registry like GradSave, then you can easily share the 529 plan with your friends and family members who can gift directly to the plan with a single click of the mouse. Plus for birthdays and Christmas, instead of more toys that get played with for a week, my daughter will receive a much more meaningful and useful gift.

  2. says

    We love our 529. Our kids are very young , but it allows us to save easily for college. We also like the feature that relatives can gift to the 529 plan directly. More wealth, less stuff. Hopefully we can give our kids a nice leg up for the future!

  3. says

    Interesting! I like the versatility feature. I’m not sure where my child would want to go for college, but knowing that 529’s are versatile, I don’t have to worry about getting it now in our current state.

  4. says

    I have a few friends that are investing into the 529 plans but I need to get a little more information on them. Like what happens if the child doesn’t go to school or you don’t need to use all the money that was saved. With the price of colleges & universities these days I told my son he better get some scholarships as well both for academics and sports!

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