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More Than One Kid: Why Two 529 Plans are Better Than One
Going to college is an expensive affair, and it looks like you can expect the cost of a college education to keep
going up and up. However, it is becoming ever more important for young people entering the workforce to have a
Bachelor’s degree, at the least under their belt. For that reason, skipping the expense of a college education is
just not practical for most. While college may be one expense you can’t spare for your kids, it doesn’t have to
send you to the poor house.
There are an increasing number of savings plans and grant programs available to families who need help financing a
college education, and one of the newest, yet increasingly popular, of these plans is a 529 savings plan. These
savings plans give families a tax break on the money they put aside for their children’s education, plus, they also
help families maximize their savings potential by investing their money in higher interest stocks and bonds. A 529
savings plan can be a great way to send your kids to college without ending up deep in debt.
The tax break you get on a 529 savings account is federal, but the account itself is a state based program. The
requirements, benefits, and costs of 529 savings accounts are determined on the state level, and they vary from
state to state, so while some states may have several 529 savings plan options, allowing you to spread out your
money and decide how much risk you are willing to take on your 520 savings contributions, other states have just
one plan.
529 savings accounts work in two different ways. Some are straight savings accounts, in which you make deposits on
a regular basis, and when your child reaches college age, they can withdraw and either spend on an in state public
university institution for a discount, or they can take to their dream school. Other 520 savings plans are actually
pre-payment payment plans. These plans are tied to specific schools, and so your child must attend that college to
get the benefits of that money. If they choose to not go to school, or to go to a different school, all of the
money may be lost, depending on the specific rules for that account.
While you’re deciding which type of 529 savings accounts you need, if you have more than one child, there is
another decision you need to make – should you have a separate savings plan for each child. Experts are split on
this topic. The general consensus is that, in theory, one account is plenty for both children. There are benefits
to spreading your money out a little bit, though. If your children are clearly headed for different types of
colleges, than you start two different accounts that are geared towards each of those institutions.
Spreading your money out minimizes the risk of choosing a bad savings plan; it gives you some back up if one of
your account bottoms out due to bad investments. If your children are not close together in age, then spreading out
their college savings plans lets you save more effectively for each child. For instance, you may need more
aggressive investments and higher returns if you are just starting to save for a high school age child, but you may
want to take your time and be a little more cautious building a plan for a pre-school age child. All in, you may be
limited in your decision making by your state’s 529 plan laws, but saving individually for your individual children
may pay dividends in the long run.
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