The primary situation that not only changed my spending habits, but changed my life forever, was having my son, Joel.
I knew from the beginning that with the decline of the socio-demographics, I wanted him to go to college and get a full education. If that was going to happen, I needed to start investing in his future now. According to this, the average price of tuition, room and board, fees, and public transportation in the year 2016-2017 at a public, in-state, four-year college was roughly $26,000.
As a new mother, I was excited to see my money going to something more exciting than my new Coach purse..
And that’s on the extremely low-end. On the higher end, it can be $48,000 and upwards. I can only imagine what the rate will be in 18 years when my son goes to college. I decided it was time to use my trusted friend on this blog journey and search the internet to see if I can find ways to invest now in my son’s future
Finding the blog Money Crashers gave me the answers for which I had been searching. As I had thought, I had reason to worry. The rates of college costs are climbing faster than those of inflation rates. In fact, just in the past 5 years, college tuition has risen over 5 1/2%, with inflation under 3%.
That’s when I learned about the 529 College Saving Plan. These saving plans allow people to invest money in a college-based account with a tax-advantaged foundation.
It’s not a ridiculous thought that by 2035, tuition costs for in-state public college, at the lowest end (!), might be close to $75,000 or $100,000 even..
Parents invest a certain amount of money based on what their child’s estimated income will be, using the online college cost calculator. The calculator helps parents figure the amount of money that will be needed over all four years, then helps parents figure out a monthly payment based on how many years your child is expected to wait before? Attending college.
When it comes time for withdrawal, if the funds are utilized for eligible expenses – everything for college, parents will not have to pay any taxes on the interest earnings. Additionally, parents will be excused from paying federal and most state taxes on any gains accrued. Other state benefits may apply for investing in a state’s 529 plan, so it’s worth investigating.
Money crashers also gave great advice on how to take steps in investing in a 529 account. Not only do you want to follow the steps above, you want to make the account as a custodial account with your child as beneficiary.
They also warn not to invest too much because anything left over or taken out, other than school needs, will be penalized 10%. That said,, it can be transferred to another plan for a different child. Also, one doesn’t want to come up short; so, it is important to stay on top of your 529 account, year to year.
As a new mother, I was excited to see my money going to something more exciting than my new Coach purse. I knew I was spending my money on something that would last a life time and worth every penny.