Notebooks, check. Pencil cases, check. Backpacks, check. 529 plan, whoops, forgot that one.
September is a good time to think about all things educational. For those who have 529 plans, increase the monthly contribution. The little extra you contribute will surely add up over the years. For those of you who don't, or are not familiar with this type of savings vehicle, here is a friendly reminder to start a 529 plan.
A 529 plan is a tax-advantaged investment vehicle in the U.S. designed to encourage saving for the future higher education expenses of a designated beneficiary. A 529 plan is the most flexible method with tremendous advantages for long-term college saving. Here are some of the most important things to know:
The Impact of a 529 Plan
Many parents may be concerned about how having a 529 plan will impact their chances of financial aid. A 529 account owned by a parent for a dependent student is reported on the Free Application for Federal Student Aid (FAFSA) as a parental asset. Parental assets are assessed at a maximum 5.64 percent rate in determining the student's Expected Family Contribution (EFC).
Parents may also wonder if they should save for retirement or save for college. Ideally, once your emergency fund is fully funded, you should aim to set aside enough money for tuition contribution goals and retirement savings simultaneously, if that's possible. If not, it's critical for parents to secure their emergency fund, then their retirement finances first before funding children's education expenses.
This work is the opinion of the columnist and in no way reflects the opinion of ABC News.