September is College Savings Month. Why? Because there is a month for everything these days. I don’t know at what point we collectively agreed to create a day, week, or month for everything, but we did. I digress. One of my biggest beefs in all of goal-setting is the belief that one shouldn’t invest unless he/she has a significant amount of money to invest. That just isn’t true. You learn to invest and you prepare your habits by investing what you can on a monthly basis, no matter the amount.
If you haven’t already, take a look at Pete the Planner’s Guide to College Planning. You will learn about how to save for college, and you will also learn some of the tax benefits of participating in your state’s 529 plan.
There’s always a ton of questions revolving around 529 plans, so let’s Frequently Asked Question each other.
What if I want to use 529 money for non-education expenses, like buying a herd of goats?
Cool. I mean, if you’re into that sorta thing. You will be taxed on the earnings and penalized 10% on just the earnings. The deposits went in after-tax, therefore the principal won’t be taxed at withdrawal.
Do I have to send my kid to college in the state that sponsors my 529 plan?
Negative, ghost rider. Big myth. Your kid doesn’t need to go to school in the state that sponsors your particular 529. A 529 is good for any accredited college or university.
Do I get a state tax credit for a 529 contribution?
You can find a chart of the different states’ tax benefits right here, sir or ma’am.
If I saved $100 month, every month, from the day my child is born, until they turn 18, how much money would be saved for college?
At a 7% rate of return, my preferred rate of return, you would have saved $41,137. Is that enough? No. It’s sure better than nothing. If you saved $150/month, you’d have $61,536. That’s a little bit better.
Pete, can you recommend a radio interview that brilliantly discusses college savings?
I sure can! Here’s my interview with executive director of Indiana Education Savings Authority, Jodi Golden. As you will hear in the interview below, there’s a way to register to win 1 of 2 $2500 prizes from CollegeChoice 529.
Peter Dunn a.k.a. Pete the Planner® is an award-winning financial mind and a former comedian. He’s a USA TODAY columnist, author of ten books, and is the host of the popular radio show and podcast, The Pete the Planner Show. Pete is considered one of the foremost experts on financial wellness in the world, but he’s just as likely to talk your ear off about bass fishing.
We’ve been saving, what I think is, pretty aggressively in 529’s for our kids since they were born. My almost 5-year-old has about $14,000 and my 3-year-old has about $9,500. We put in $200 per month per kid. If I’m doing the math right and college costs keep rising like they have been, we will only have about 75% of the cost of 4 years at a state supported school when they are 18. That’s crazy to think about.
We’ve been saving, what I think is, pretty aggressively in 529’s for our kids since they were born. My almost 5-year-old has about $14,000 and my 3-year-old has about $9,500. We put in $200 per month per kid. If I’m doing the math right and college costs keep rising like they have been, we will only have about 75% of the cost of 4 years at a state supported school when they are 18. That’s crazy to think about.