Now is the time to start saving for your child’s college fund
While it may seem the easiest way to start a college fund is to set up a standard savings account, it’s not the most ideal. In fact, in Sallie Mae’s annual How America Saves for College report, 45 percent of parents are doing so. But they end up paying thousands of dollars in avoidable taxes. While saving this way is better than not saving at all, a more efficient option is through a 529 college savings plan.
In 1996, the federal government stepped in to encourage saving for future higher education expenses by creating tax-advantaged 529 savings plans. These plans make it easier to save for college — even for those on a modest budget — and have become the most popular education-specific savings plans because of their tax-free benefits and higher interest rates.
The Edvest College Savings Plan is Wisconsin’s state-sponsored tax-advantaged 529 college savings plan. As one of the lowest-cost 529 plans in the country, you can open an EdVest account with as little as $25 dollars. Accounts can be managed online, and users can set up automatic contributions from their bank account or by payroll deduction (if supported by your employer) with a minimum contribution of $15 per month. Funds can be used for Wisconsin’s technical colleges and most accredited colleges and universities in the United States — even certain colleges abroad.
There has also been movement around the state recently to make these plans even more flexible. They can now be used for parents, as well as children, who want to continue their education. Because you can now change a 529 college savings account’s beneficiary to another member of your family without penalty, some people take out 529s with themselves as a beneficiary and then transfer it to their child’s name. Although contributions are not deductible on your federal tax return, also new for the 2018 tax year, any contributions may be deducted from Wisconsin taxable income up to a maximum of $3,200 per year, per beneficiary.
Besides paying for tuition, EdVest funds can be used for fees, certain room and board costs, books, supplies, as well as computers and related technology costs such as Internet access fees and printers. Additional equipment required for attendance may also qualify.
All parents want a bright future for their child, and postsecondary education or training is the best way for that to happen. To avoid the burden of student loans, consider starting a savings plan sooner rather than later. Even small monthly contributions add up over time. Visit Edvest.com for more information.