It is that time of the year again, when your children are going back to school and you are busy dreaming about their bright future. Well, when it comes to a bright future, college education plays an extremely important role. Now, that college education has become expensive, it is about time for every parent to invest in a 529 savings plan. For more information on 529 savins plan, read my previous post “Benefits of Investing in a 529 College Savings Plan”. To get the maximum returns out of your 529 savings plan, follow these tips
Choose the Direct sold plan
Well, you may be tempted to choose an advisor sold plan because you feel that you will receive an expert advice and your investments will be safe. Here is the caveat. You are paying a hefty fee for the advisor sold plan. Direct sold plan is less expensive and in exchange you need to do a little bit of research on whether your state plan is a good option or not. Websites like savingforcollege.com, nerdwallet.com, collegesavings.org offer side by side comparison of 529 plans of different state. So, you don’t have to really reinvent the wheel. Take some cues from these sites and go with the best plan.
Review your Financial Goals
It is always advisable to review your financial goals and see if you have saved enough for your child’s education. The best time to do is twice a year and that is why many direct sold plans allow you to change the allocation and the amount of savings twice a year. So, you can set a calendar and review the returns on investments in 529 Plan and again it is a good idea to compare the plans of other states as well. If by the end of the year, you feel that your state is not offering enough returns, you may opt for a different state and transfer the savings to a new state plan (you may have to lose the state tax exemption though). On the other hand, if your state plan is doing really well and you think that you have saved enough money to cover the educational cost, you can either scale down or continue to save more so that you have sufficient balance which can later be used by your children.
Involve your Children
Well, it is always good to talk to your children about their education and their plans related to higher education. You might want to send your child to MIT or Stanford Business School, but your child is somewhat interested in liberal arts and your state university offers wonderful opportunities for liberal arts. So, it is a waste to make an investment in out of state plan, when you can buy your own state’s 529 plans and may get tax exemption as well. It is always good to be realistic about your child’s education and let her choose the career she wants.
“Every child is gifted, some just open their packages sooner than others.”—Michael Carr.