529 Plans You Should Highly Consider

When my husband and I found out that baby number three was also baby number four, and that Baby B was our long-awaited boy and Baby A was our much-loved third little girl, my husband turned to me in a moment of panic and said, “Three weddings, babe. We have to pay for three weddings,” with a hint of shock. I nodded in agreement and terror and realized that I’d rather pay for 25 weddings before paying for four kids to go to college. College, as it happens, is not cheap. It’s not even close to cheap – and that’s right now. By the time our kids are in college, something tells me that it’s going to be so expensive we can’t even fathom how much the cost will be. And that’s when we decided that our 529 plans for the kids are more important than ever.

But it wasn’t an easy decision to begin those plans when our first daughter was born. After all, it was 7 years ago, we were first time parents and we had no idea what we were doing when it came to saving for college (what do you mean I don’t just put money into an account and let her have it when she enrolls?). That’s when we began the process of learning as much as possible about these numerous plans and what they offer to us (tax benefits) and to our kids (college tuition). That’s when we realized that there are several plans worth considering available to parents who want their kids to go to college and want to save for it now.

In a nutshell, a 529 is a college savings plan. It allows you to set aside money with the state or a higher education institution so that you can help your kids pay for college one day. There are so many things that you have to learn about these before you choose a plan, such as the fact that different states don’t matter. According to the IRS, you can be a resident of Florida, invest in a college savings plan from Kentucky and send your kid to Notre Dame. At the moment, almost every state in the country has a plan – at least one – and that means you have many to choose from. Remember, out-of-state plans are perfectly acceptable, and your child will not suffer because you choose one. Here’s some plans worth considering.

Prepaid Unit

This is a type of college savings plan that might be the one for you. This is a plan that allows you to put aside money in which you use to buy credit hours. Each dollar you put away in this account is used to purchase credit hours so that your student is already able to go to college using one of these plans. For instance, if you put away enough, your child could end up with as many prepaid college credit hours as he or she needs to graduate from college with a general degree. This type of savings plan is one of the more popular.

Prepaid Contract

This is the one my husband and I chose as it works best for our family since we do have four kids. This one allows us to prepay our children’s college tuition for up to 5 years of college. Essentially, we sign a contract stating that our kids will go to college and that this money is going to pay for this many years of their college education, and then we pay either a lump sum to keep that money in savings or we pay through an installment plan. What we love about this plan, however, is that it’s very effective and it’s so easy to use and understand. Our kids will be very grateful – they better be, at least – when it’s time for them to go to college and they have their years paid for in full. The good news with the vast majority of these contracts, too, is that they lock in the current college tuition rates, so that you don’t have to worry about the cost of higher education rising as your kids get older – which is something that it is very likely to do in the near future.

Direct Sold Savings Programs

These are plans that are worth considering if this is where you see yourself saving. Essentially, this is the kind of plan that requires the knowledge of a professional fee-based financial planner, and it allows you to save money through a plan manager. It is not a requirement that you use a financial planner for this, but it is helpful. The alternative is that you spend your time doing the necessary research on your own, which is not nearly as effective as it might be in another manner. This kind of savings plan is approved by the state in which you choose to save through, and the accounts are carefully monitored by an investment firm. It’s a bit more complex than other savings plans, but I have heard wonderful things from those who do choose this particular type of plan when saving for their children’s future.

Broker Sold Savings Programs

These are highly effective and very beneficial college savings plans, particular to those who are uncomfortable making financial decisions such as this without the help of a professional money manager. You’ll have to go through a broker to find a plan you like, but the broker is there to do a job for you. He or she will take your budget, your children and their future into consideration when choosing specific plans that might work best for you, and then they will do what they can to ensure that you are able to choose the best one. The broker will manage the account, help it to grow and make sure that your kids have the brightest possible future when it comes to having a way to pay for college, which is expensive.

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