March 22, 2022
As you step back into your garden this spring, you might see the green tips of leaves peeking through the soil. In my garden, the first sign of green crocus leaves means that soon flowers will spread, and the space will be full of vibrant, beautiful colors. Similar to these early symbols of springtime, this kind of blossoming in our bank accounts calls for a celebration.
When it comes to money, most financial experts advise saving something and saving often.
To begin building wealth, automating your savings is recommended. Why? As deposits are automatically contributed to a savings account, the funds move into a dedicated place without any work on your part.
According to a recent Forbes article, more parents than ever before now plan and save for their children’s schooling. However, many are still caught off guard by the high costs associated with college. According to the 2021 College Savings and Student Debt Study, parents and families are grossly unprepared for the reality that college pricing has far outpaced inflation over the last decade.
Investing in a solid 529 plan could help make a significant difference when paying for the costs of tuition, books, computers, and other supplies required by educational institutions.
Two ways to save with a 529 account include utilizing automated contributions and taking advantage of compound growth.
Automated contributions. The success of using automated savings is easily seen with the example of employer-sponsored 401(k) accounts. There, a portion of your pre-tax money is taken out of your paycheck and deposited into your retirement account—without you needing to do anything. The same philosophy is also helpful for a growing 529 account.
Many banks and credit unions, employers, and even 529 plans themselves will assist in setting up automatic deposits into a 529 account. Like the retirement savings example, automating your deposits takes away the burden of remembering when and how much to deposit into your education savings.
As with any savings, if deposits into a 529 plan are contributed automatically, the money is less likely to be used for other expenses and has more opportunity to grow.
Compound growth. To maximize the growth of a 529 college savings account, strategy is key. Every dollar increases your potential to take advantage of compound growth. By reinvesting your earnings, you can create a snowball effect. The returns increase because they can generate additional returns.
Savings in a 529 account are dollars that don’t need to be borrowed through student loans and paid back with interest.
Automating your savings for the costs of education and taking advantage of compound growth gets your money to work for you and your family’s future educational goals.
About the author:
Meredith McNett writes for my529, Utah’s official nonprofit 529 educational savings plan. It is the nation’s third-largest direct-sold plan with over 400,000 accounts and billions in assets under management. my529 has been helping families across the United States invest for higher education for more than 25 years. Accounts are free to open and require no minimum deposit.