How to Get Started Saving With a 529 Plan
Saving for a loved one’s education is one of the most rewarding things you can do for their future. It can also be challenging if you don’t know where or how to start. The College Savings Plans Network (CSPN) has designed this website to help you get started on the right path toward achieving your savings goals. You can find additional information about federal tax benefits for 529 plans, by reading IRS Publication 970: Tax Benefits for Education.
Start a Savings Strategy
Creating a savings strategy will ensure that you remain on track towards meeting your goals. Below are some important points to consider when creating your savings game plan.
Define your savings goals.
The first step is to determine how much you want to save for your child’s education. Do you want to save for all four years of college or just two? Do you want your savings to cover just tuition, or room and board, too? Do you think your child will attend public or private college? Defining your goals will help you to establish how much you should save and measure your progress. Our College Cost Calculator can help you get started.
Start as early as possible.
The earlier you start, the easier it is to save. You will be able to spread out your contributions and will have more time for your money to grow.
Save as much as you can afford.
Take a look at your budget and see how much you can dedicate toward saving for college. Even just $25 a month can add up over time. Consider reducing other expenses (e.g. delay buying a new car to avoid costly monthly payments) and put the difference into your college savings. The key is to get started and gradually increase your monthly savings over time.
Use automatic transfers.
Take advantage of convenient ways to save such as payroll deduction or automatic transfers from your bank account.
Consider investing in a 529 plan.
There are many ways to save for college, but 529 college savings plans offer families unique benefits and opportunities. States often offer special benefits (in addition to federal tax benefits) for residents such as state income tax deductions, matching grants, or scholarship opportunities.
Begin Saving with a 529 Plan
Section 529 plans are tax advantaged savings programs administered by states to encourage saving for education expenses.
Step 1: Educate yourself.
If you’re not sure where to start, visit the 529 Basics section of our website to learn more about education savings and 529 plans. A good place to start is the Common 529 Questions page.
Step 2: Consider your state’s plan.
When choosing a 529 plan, you should always consider your home state plan first. States often offer tax benefits for residents, and sometimes also offer other benefits such as matching grants that would not be available by investing in another state’s 529 plan. To view your state’s 529 plan offerings, consult our My State’s Plan page.
Step 3: Compare plans.
Many states offer their plans to non-residents. If your state plan does not offer the features you are looking for, you can choose to participate in another state’s plan.
Our 529 Comparison Tool will help you review plans side by side to find a 529 plan that best meets your needs.
The 529 comparison tool gives you two options for comparing plans:
- Compare 529 Plans by State – filter by the states whose plans you wish to compare.
- Compare 529 Plans by Feature – filter by the plan features that are most important to you.
Step 4: Start Saving
Once you’ve narrowed your search and have picked a plan, visit that plan’s website to learn more, establish an account and begin making regular contributions. And remember, you are not limited to just one plan. Many families choose to diversify their college savings portfolios by participating in more than one plan.