A 529 College Savings Account is a great way to help pay for college

You’ve just had a baby and the realization hits you, that little person will someday need money for college. With the rising costs of higher education, you worry about financial planning to help your child have the money they will need to attend college.

Robbing Fort Knox is a potential lucrative option, but a better alternative is to start a 529 Savings Account. The 529 College Savings Account is named from the Internal Revenue Code 26 U.S.C. 529. The traditional 529 Account purchases stocks ranging from very aggressive to very stable.

Initially when a child is young, most people choose to establish a portfolio that is more aggressive to yield a higher return, but this also means the potential risk is higher. As the child grows, parents can switch the portfolio from an aggressive investment to a more conservative one as the child comes closer to college age. A 529 College Savings Plan grows with tax-deferred earnings, which allows for tuition and books to be federal income tax free.

There are two ways to initial investment to start a 529 Account, notes USAA. The first ways is an $50 initial investment with an automated monthly addition of $50 (annual reoccurring investment $600). The other method is $250 one time investment to open the savings plan. If started early enough, with 18 years of investing places about $10,000 in the plan. This is based on 0 percent return and chances are the 529 should have some increase in returns over the ‘life’ of the plan.

The intent, of course, is that all those funds purchase stocks that go up in value giving you a substantial college fund. Another advantage of a 529 is the ability to have contributions made to the account. Instead of the gift card or check for birthdays and holidays, you can have friends and family can contribute to your child’s account starting at $15.

For the account owners (parent), the account has tax-deferred earnings and tax-free qualified distributions. Gift contributors (friends and family) can  contribute up to $14,000 per year, $28,000 for couples filing jointly. The account owners (parent) maintain control for the life of the account. For the student, there is little effect on their financial aid since the account is considered assets of the account owner.

A way to add to the college fund is to join Upromise. This free website turns everyday purchases, such as gas and food, into free money for the 529 Account. The way it works is when you go shopping, Upromise-sponsored products put a percentage of your purchase into the Upromise account. Normally its a few pennies a week, but those pennies over 18 years can really add up. When the Upromise account reaches $50, the amount can be transferred into the 529 to purchase more stock. The more friends and family that sign up and purchase Upromise sponsored products, the faster the minimum balance is met.

Before jumping online, it is a wise idea to check out several banks or investment firms to research the best account. A 529 College Savings Account is a great way to help pay for the soaring costs of college.

The younger your child is when you open the account, the better. Starting early could give up 18 years to invest and make those college bills a little easier to take. The 529 account may not give your children a free ticket to college, but could help take sting out of the financial costs.