Every parent wants the best education for their child. With the increasing costs associated with higher education, it’s essential to start saving early. That’s where 529 plans can be helpful.
A 529 plan is a tax-advantaged savings plan that was created to encourage saving for college. These plans are available all 50 states and are tailored for parents who wish to manage their finances and savings to ensure a better future for their children.
Also known as qualified tuition plans, 529s are sponsored by states, banks, or educational institutions.
There are two types of 529 plans:
- Prepaid Plan: Through this plan, you can purchase credits. These credits can then be used at participating colleges and universities for future tuition (and sometimes room and board). The credits are purchased at today’s rates, so the performance depends on tuition inflation.
- Savings Plan: A 529 savings plan works similarly to a 401k or IRA plan. The account holder makes contributions, and the growth and performance of the account is based on the investments (typically mutual funds).
This chart from the SEC does a great job of describing the differences between the two types of 529 plans:
Saving now will ensure your children get the education they need for a bright future. Call Horizon bank — we can help you get started today.