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What is a 529 College Savings Plan?

Blog disclosure: This post is sponsored by the Florida Prepaid College Board. All thoughts are my own.

As you all may know, I write about student loans for some of my banking clients. In the last two years, I’ve written about the amount of debt students find themselves in, repayment options, and what happens when people default on their loans. I’ve also interviewed student loan experts on my podcast to help listeners know their options.

Needless to say, knowing how dire the student debt situation is, it’s made me a very passionate advocate for college savings plans.

I don’t even have kids yet and I’m already thinking about how much college is going to cost and what I can do to make sure my future children don’t need to take on debt for their education.

One option is a 529 plan.

What is a 529 plan?

A 529 plan is a tax-advantaged savings plan that allows you to save money for education. These plans are sponsored by states, state agencies, and educational institutions. There are also two kinds of 529 plans – prepaid savings plans and education savings plans.

I’ve discussed prepaid savings plans in the past. This time we’re talking education savings plans. In the case of a 529 plan, the account holder opens an investment account to save for the beneficiary’s future higher education expenses. Savers usually have the option to choose from a range of investment options like ETFs or aged-based portfolios.

Pros of a 529 Plan

There are three main advantages to using a 529 plan.

  1. You can typically use the funds at any institution. You can also use the money to pay for education before college as well. For example, you can use the money in a 529 plan to pay for private elementary school.
  2. Return on investment can be strong. Whereas with a prepaid plan, you may not see a big return on investment, with a 529 plan you could. Of course, as with all investments, a return is not guaranteed. However, the more time you have on your side, the more your money grows in your investment account.
  3. Depending on the state, 529 plans come with special tax benefits. For example, the Florida 529 Savings Plan is tax-free so long as the withdrawals are used for qualified education expenses (any money outside of that would be subject to federal income tax).

Florida Residents Get $25 When They Open a 529 Plan

Now that we’ve covered what a 529 savings plan is, it’s time to get to the good news! Florida Prepaid is having a Summer Jump-Start Promotion where you can get $25 toward your savings when you open a Florida 529 Savings Plan. You can get an additional $25 when you set up automatic monthly contributions for as little as $25 per month. You have until June 30th to set up the plan and receive the incentive, and it’s only applicable to the first 5,000 plans opened! So hurry!

Here’s how to get started:

The sooner you start saving for your child’s future, the better off they will be. The last thing you want is for them to be one of millions of Americans who are being crushed under the weight of student loan debt.

Click here to get started with a Florida Prepaid 529 Plan and receive up to $50 before June 30th!

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