By Tim Gorrell, Executive Director, Ohio Tuition Trust Authority
October 22, 2019
You’ve heard this adage many times, but it’s still true: It’s never too early and it’s never too late to start saving for your child’s higher education in a 529 plan. No matter how old your child is, you can take steps to build a college savings fund. Here is some saving guidance on what to do while your child is young.
You can start saving before your child is born by opening a tax-advantaged 529 college savings account under your own name. Once your baby has been issued a Social Security number, you can transfer the account to them. The sooner you start the 529 account, the sooner the power of compound interest and tax-free earnings can go to work growing the account.
While setting up a 529 plan, you may want to consider an age-based portfolio in which to place your college savings. These investments contain more equity in its asset allocation when your child is young. As your child grows older, the portfolio progressively decreases the amount of risk in the 529 account to a more conservative mix. This way, the accrued funds aren’t susceptible to stock market volatility when your child will need the account to cover their qualified higher education expenses.
It’s easy for others to make contributions to a 529 account. At baby showers, birthdays, holidays and other special celebrations, ask for the gift of a higher education for your child with a contribution to a 529 plan. Loved ones can give you a check to deposit into the college savings account. Many state 529 programs have special gifting options where you can request gift codes that allow the gift givers to donate online directly to your 529 plan, without needing the 529 account number.
Car seats. Diapers. Cribs. Diapers. Toys. Diapers. Clothes. Diapers. Diapers. Diapers. The list goes on and on. Before you go shopping, sign up for Upromise, a free loyalty program that offers members cash back and rebates for purchases made at a wide variety of businesses. First, you connect your debit and/or credit card to your Upromise account to earn rewards with your everyday shopping. Then link your Upromise account to your 529 account to roll over these rebates.
Once your child starts elementary school full time, why not roll over those daycare or preschool expenses to a regular 529 plan contribution? As a disappearing expense—those costs that are part of your budget for a short period of time—the dollars you’ve already prioritized for pre-K education will now support your child’s higher education. As those bills are part of your budget, you won’t be missing the money if you shift them to build the 529 plan.
Don’t forget to keep adding to your child’s college savings account. As your life gets busier, you can set up automatic contributions so there’s one less item on your to-do list. It’s simple. Once you’ve set it, you can forget it to concentrate on more important items— like playing with your child.
Someday your child will be head off for a higher education, so start saving today in a tax-free 529 plan.
About the Author
Tim Gorrell is the executive director of Ohio Tuition Trust Authority. For 30 years, Ohio Tuition Trust Authority has sponsored and administered Ohio’s 529 Plan, CollegeAdvantage. As of June 30, 2019, Ohio’s 529 Plan oversees more than 642,000 accounts with $12.4 billion in assets under management. Visit CollegeAdvantage.com or call 1-800-AFFORD-IT (233-6734) for more information.