By Bryn Ramjoue, Marketing Director, my529
January 7, 2020
By the time you read this, if you’re anything like most people, you have likely set some New Year’s resolutions—and then broken them.
Someone even marked a day for that. January 17 is apparently Ditch New Year’s Resolution Day.
However, for all the good things we want to do—lose weight, get organized, exercise more, save money—we are often vague about the execution. The way to succeed in your resolutions, according to a New York Times article titled “How to Make (and Keep) a New Year’s Resolution,” is to be SMART about them. SMART, the January 2018 article explains, stands for Specific, Measurable, Achievable, Relevant, and Time-bound. The concept comes from a 1981 management journal but is still used in management circles—and now, resolutions.
This year, you could resolve to get SMART about investing funds for education. Since the holidays are over, January is a great time to assess your goals and time horizon. Investing for future educational expenses, regardless of how much you contribute, is a resolution you will want to keep.
The easiest method to make SMART contributions regularly to your 529 account is by scheduling automatic transactions. Say you set up a monthly contribution of $X to be transferred from your bank account to your 529 account. Voila! Your contribution is Specific, Measurable, Achievable, Relevant, and Time-bound. Resolution success unlocked.
When you open a 529 online, check to see if you can arrange electronic contributions through your bank or credit union. Most programs also have paper forms that you can fill out. A great resource for finding a 529 that’s right for your family’s needs is CollegeSaving.org. Review your home state’s plan and compare it to other programs across the nation to find the right fit.
Set it and let your contributions accumulate to allow for potential growth. Even automating small contributions can add up over time. The earlier you start, the more time you have to invest. As an example, investing $20 a month over 18 years could yield $6,984, while a $50 monthly investment could turn into $17,460 over the same period. Investing $100 monthly for 18 years could become $34,920. (All numbers assume a 5 percent annual rate of return, compounded monthly with no initial contribution, and are used for illustrative purposes only.)
Other ways to be SMART about 529 contributions include inviting family and friends to contribute toward your beneficiary’s education. If you get a raise this year, think about contributing that percentage to your 529 account. You could contribute all or some of your tax refund if you receive one for the 2019 tax year. Please check your state’s plans for details.
About the author:
Bryn Ramjoue is the marketing director for my529. my529 is Utah’s official nonprofit 529 educational savings plan. It is the nation’s third-largest direct-sold plan with over 400,000 accounts and $15 billion in assets under management. my529 has been helping families across the United States invest for higher education for more than 20 years. Accounts are free to open and require no minimum deposit.