A modern lifestyle brand redefining motherhood

What's a 529 college savings plan? What parents need to know

Print Friendly and PDF

As you dream of your child's future, you might have this question looming over your head: How am I going to pay for my child's college education? As parents, we know that the earlier you start a college fund for your kids, the better.

If you're not sure what other ways you can financially prepare for the coming college years, a good place to start is a 529 college savings plan. These savings plans are designed specifically to help pay for college and are a great investment option for families who want to see their money grow, tax-free, over a stretch of time.

Here are answers to common questions around 529 plans so you can be fully equipped to start saving for your little one's bright future:

What is a 529 savings plan?

A 529 is a state-sponsored college savings plan that allows parents to invest money towards educational expenses. The 529 is beneficial for many reasons, but most importantly, the savings plan is tax-free. Once the beneficiary of the account is college-bound, they're able to withdraw funds free of federal and state income taxes.

By the time college rolls around, the recipient can use the money towards a variety of schooling necessities, such as:

  • Tuition
  • Books
  • Laptops and related technology devices
  • Room and board

Additionally, as of January 1, 2018, families can now also use their 529 plans to pay for private elementary, middle and high school tuition.

What kind of 529 plan should I get?

There are two types of 529 plans:

FEATURED VIDEO
  • College savings plans: This is the more popular of the two 529 plans. The plan works by establishing a savings account specific to schooling expenses. Contributions are invested, tax-free until the beneficiary is ready for college.
  • Prepaid tuition plans: The prepaid tuition plan allows parents to pre-purchase all or part of tuition costs for an in-state, public school. The investment can then transfer to one of the 250 private or out-of-state colleges sponsored by the plan. This plan is great for locking in current tuition rates, but make sure to consider all the terms, as some schools come with high premiums and are not always guaranteed to be covered.

How do I contribute money to my child's 529 plan?

There are two approaches to contributing to a 529 account:

  • Static funds: Static funds include stocks, bonds, real estate funds or money market accounts. This is a customized plan that tends to be more appealing to investment-savvy folks.
  • Dynamic investment: Dynamic investments are based on the beneficiary's age, which starts off by investing in stocks and higher-risk options. As the child ages, the investment automatically shifts to a steadier, low-risk option. This approach is better for those who prefer a hands-off approach towards investing.

Where should I open my 529 college savings plan?

Although every state offers at least one 529 plan, their investment options and fees look a little different.

You can invest in any state's 529 plan, even if you don't live there or your child won't go to school there. With that said, some states offer tax deductions based off of 529 contributions, so it's worth shopping around to see what plan works best for your current situation.

Starting a 529 college savings plan requires some time and research and before you dive in, it's important to know where you stand. With tools like Intuit's Turbo, you can gain a holistic view of your financial profile and see your income, credit and loan details in a single account dashboard.

Will this impact my child's ability to file for financial aid?

Financial aid takes family income and additional assets into account, but when a student applies for Federal Student Aid, there's a section of the application dedicated to Expected Family Contribution, where the student will note family income and assets, such as the 529 plan.

Fortunately, a 529 is weighed far less than other areas of wealth, which means that it will not greatly impact a student's eligibility for financial aid nearly as much as if the child comes from a wealthy family.

When it's time for college, how does my child access their 529?

Assuming that the 529 plan was open in the parent's name, you would allocate the funds in its totality or on an as-needed basis, on behalf of the recipient. Parents can also transfer the account into the beneficiary's name, when their child is prepared to take on that responsibility. This is also a great time for parents to have the real money talk with their child as they head off to school, so they understand what these funds are used for.

Is my 529 plan tax deductible?

When it's tax time and you're getting ready to file all you'll have to do is answer a few simple questions about your education tax benefits associated with your 529, and you'll be eligible for relevant deductions. If you run into any jams during this process, you can connect with a tax pro or CPA to answer your questions.

You might also like:

Who said motherhood doesn't come with a manual?

Subscribe to get inspiration and super helpful ideas to rock your #momlife. Motherhood looks amazing on you.

Already a subscriber? Log in here.

Student loan debt is a major problem for many mamas and their families―but it doesn't have to be. Refinancing companies like Laurel Road help families every year by offering better rates, making payments more manageable or helping them shorten their loan term.

If you're ready to start taking control of your student loan debt, here are five steps that could help you conquer your student loan debt and get a loan that works for you.

1. Understand your refinancing options.

Like motherhood, managing student loan debt is a journey made much easier by experience. If your eyes start to cross when you hear variable and fixed rates or annual percentage rate, start your process with a little education. Laurel Road offers a user-friendly resource hub with student loan refinancing guides and articles that can help explain your options and get you started on a more informed foot.

2. Potentially improve your credit score.

Your credit score is important because it provides an objective measure of your credit risk to lenders. It also has an impact on many aspects of your finances, so it's a good idea to understand and track your score regularly. To try and improve your score, pay your bills on time—your payment history is one of the most important factors in determining your credit score. Having a long history of on-time payments is best, while missing a payment may hurt your score. Another action to improve your credit score would be to keep the amount you owe low—keeping your balances low on credit cards and other types of revolving debt, such as a home equity lines of credit, may help boost your score. Remember, good credit scores don't just happen overnight, but taking positive financial steps now can lead to more positive outcomes in the future.

3. Get a better understanding of your current loan benefits.

Different loan types have different benefits and you want to make sure you don't lose any valuable benefits by refinancing your current loan. Before you're ready to apply for a better option, you need to know what you have. Determine your loan terms (how long you have to pay off your loan and how much you're required to pay each month) and find out your current interest rate.

When you took out your original loan, especially if it was a federal loan, everyone who applies is given the same rate regardless of their personal credit. When you look to refinance, companies like Laurel Road look at your credit score and other attributes to give you a personalized pricing option―one that's often more competitive than your original terms. However, it is important to know that federal loans offer several benefits and protections, including income based repayment and forgiveness options, that you may lose when refinancing with private lenders (learn more at https://studentloans.gov). Try Laurel Road's Student Loan Calculator to get a bigger picture perspective of what it will take to pay off your loan and the options available to you.

4. Pick the terms that fit your lifestyle.

Your long-term financial goals will determine what refinancing terms are right for you. For example, a 3- or 5-year loan means faster payoff times, but it will mean a higher monthly payment―which might not be possible if you're planning to purchase a home or looking to move your toddler to a more expensive school. A loan with a longer term will have lower payments, but more interest over the duration of the loan.

Want to see what your options are? Check your rates on Laurel Road. They'll perform a "soft credit pull" using some basic information (meaning initially checking your rates won't affect your credit score ) so you can make an informed decision. If you do proceed with the application Laurel Road will ask for your consent on a hard credit pull.

5. Don't miss out on discounts.

With a little research, many people can find opportunities for lower rates or discounts when refinancing their loans. For example, if your credit isn't the best, look into the possibility of adding a cosigner who may help boost your rate. There are also many associations and employers who offer student loan benefits. Laurel Road partners with a number of groups and employers who offer discounts on rates―so check with your professional associations or HR to see if any options are available to you. Finally, talk to your financial institution, especially if you're planning to take out another major loan like a mortgage. In some cases, having another product with an institution can get you a preferred customer rate.

This article is sponsored by Laurel Road. Thank you for supporting the brands that support Motherly and mamas.

Our Partners

It's Father's Day and dads around the world are getting some love from their loved ones, and we are loving all the adorable posts on Instagram today.

Celebrity dads are getting (and dishing out) a lot of love today, and these 10 Instagram posts, in particular, are melting our hearts.


James Van Der Beek 

James Van Der Beek will always be Dawson to many millennial mamas, but to his five kids he's just "Daddy." His wife Kimberly posted the cutest pic of James with their kiddos, Olivia, Emilia, Annabel Leah, Joshua and baby Gwendolyn.

James posted the same photo to his own account, with a caption that may make you cry.

He wrote: "For me, being a father means having that quiet little voice inside of you that says 'Be a better man,' get louder and more consistent... to the point where you can't really remember where that voice ends and where you begin. It means being tired beyond what is probably healthy, and patient beyond what you previously thought possible. And even though you know you're far from perfect... being a father also comes with an unshakable awareness that all your actions have consequences - context that reaches far beyond your own self-interest. It's scary to feel that interconnected with the rest of the world - especially with your heart now walking around outside your body - because it demands more personal responsibility... but it will make you a better man. Of at least that I'm sure. #HappyFathersDay to all the imperfect dads out there, trying their best and learning on the job.👊#fatherhood"

That post gives us more feels than any episode of Dawson's Creek ever did.


Today, our Istagram and Facebook feeds are filled with evidence that today's dads are doing more than any other generation of fathers. Congrats guys, you really deserve a Happy Father's Day!

You might also like:

popular

The bond between sisters is special, but Jill Noe and Whitney Bliesner have a unique bond that goes beyond just being siblings. As twins, Jill and Whitney shared a lot throughout their lives, and when Jill became Whitney's surrogate they even shared a pregnancy.

As first reported by Today, Whitney has a rare disease called NF2 (Neurofibromatosis type 2). Because of NF2 she lost the vision in her left eye and hearing in her right ear, along with partial hearing loss in her left ear. The condition makes pregnancy risky, and the disease is hereditary.

Whitney and her husband, Pete, wanted to start a family, but adoption and surrogacy fees seemed to be putting parenthood out of their reach. Until Jill stepped in as their surrogate.

"We have always had a strong connection, I do think this experience made our connection stronger, for sure," Whitney tells Motherly, adding that she's sure that when Jill eventuallu has kids of her own the sisters will likely bond over motherhood, too.

Through IVF, Jill carried donor eggs fertilized with Pete's sperm to make her twin sister's family, and on June 7 Jill delivered Whitney and Pete's son and daughter, little Rhett and Rhenley.

FEATURED VIDEO

"Going through this with Jill was so easy," Whitney tells Motherly. "We both had no idea what was going to happen or how we would deal with stuff during this journey. We had our ups and downs, but I think that's life, and in any situation you would experience that. But with my sister, there was a sense of everything was going to be ok, like always. We always get over our annoyance and disagreements with each other very fast with no hard feelings. It was just a great experience to have with my best friend, my twin sister."

Rhett and Rhenley are keeping Whitney super busy these days (with twins, someone is always hungry!) but she's making time to share her story because she wants other people who can't physically be pregnant to not give up on their dream of being a mom.

"It's not about blood or biologically carrying a kid that makes you a mom, it's the unconditional love, care, and security you give a child that makes you a mom," she explains.

Whitney continues: "Even though you aren't carrying or blood-related, you still have those feelings of babies being yours!"

Whitney calls Jill her best friend and Jill says the feeling is mutual, telling Today that she knows Whitney would have done the same for her if the roles where reversed.

"She's always wanted to be a mom and her disease has already taken so much from her. I wasn't going to allow (NF2) to take this opportunity from her, too," Jill said. "It just felt like the right thing to do. Our family is so strong and so supportive of one another, especially since Whit's diagnosis in 8th grade."

Thanks to Jill, Whitney is now living her dream, taking care of her two adorable babies.

Jill is an amazing sister, and Whitney is already an amazing mom.

[A version of this post was originally published June 14, 2019. It has been updated.]

You might also like:

News

A dad's first Father's Day is always special, and Prince Harry is no exception. The Duke and Duchess of Sussex released a new photo of Baby Archie clutching his father's finger.

😍

It's been just over a month since little Archie Harrison Mountbatten-Windsor came into the world and changed his father's. Shortly after the birth, Prince Harry described new fatherhood as "the most amazing experience I could ever possibly imagine."

This sweet Father's Day Instagram post is the first look at Archie the public has had since the royal family did their post-birth photoshoot in May.

While Archie's mom and dad recently attended the Queen's birthday celebration, Trooping the Colour, little Archie is still a bit too small for such a big party. His older cousin Prince Louis made his first Trooping appearance this year, so we can expect to see Archie at the Queen's birthday parade next year.

FEATURED VIDEO

Baby Archie and Prince Louis will likely be together soon for Archie's christening. Reports suggest the event will take place next month at Windsor Castle, the same venue where Archie's mom and dad got married, and where Prince Harry was baptized back in 1984.

We can't wait to see more photos of sweet baby Archie on his big day!

You might also like:





News

Do you feel guilty when you don't want to play with your kid? I do.

Do you give in and play with them anyway, all the while checking your phone and wondering exactly how long you have to pretend to be a dinosaur? Or do you say "no" to play time and endure the inevitable whining, coupled with mom-guilt that ensues?

Neither of these options is particularly tempting.

So what's a mom, with a fully developed intellect and adult interests and subsequent lack of interest in playing with toys for 10 to 12 hours a day, to do?

Here are six phrases to try next time your kid wants to play and you need a break.

1. "I will be cleaning the kitchen. You're welcome to join me."

This is my personal favorite and one I use daily. The next time you need to get something done and your child is clinging to you, offer an invitation instead of a dismissal.

Try asking your child to join you instead of saying, "go play." The beauty of this phrase is that it gives your child a choice—they can either be with you and help with what you are doing, or they can go play independently.

Often my toddler will join me for a while and then drift off to play on his own.

2. "I'm not available to play dinosaurs right now. Would you like to read with me?"

While sometimes we simply need to get something done, other times we just honestly do not want to play whatever our child is asking us to. And that is okay.

FEATURED VIDEO

There are only so many hours in the day that you can reasonably be expected to play dinosaurs or princesses. If you are available to spend time with your child, but find yourself cringing at the idea of one more game of superheroes, offer an alternate activity.

It's important for children to get the chance to choose the activity sometimes, but it doesn't have to be all of the time. Offer one or two activities that you would genuinely enjoy doing with your child and give them the choice of whether to join you.

3. "I'm going to read for 20 minutes and then I will be able to play Legos with you."

Let your child see your interests too. You don't have to cram your own life and hobbies into nap time and after bed. It's okay, and even valuable, to let them see that you are a whole person with your interests.

Tell them that you want to read or garden or workout for 20 minutes. Invite them to sit nearby, or to play on their own. It helps to start with a very manageable amount of time, like 15 or 20 minutes, and stretch it as your child's ability to play on their own grows.

Your child may sit and whine for the entire 20 minutes. While this can be annoying, it is best not to respond in anger. Try to acknowledge their feelings, but don't give in to their demands. You might say, "I see that you're having a hard time waiting for my attention. Reading is important to me. I'm going to read for 15 more minutes, and then I would love to play with you."

If you do this consistently, your child will get used to the idea that you have needs and interests too.

4. "I don't want to play right now, but I would love to sit and watch you."

Be honest with your child. It's okay if you want to be with them, but don't feel like actively playing. This can be an excellent way to observe how your child plays when left to their own devices. It is also a way for them to share their favorite games with you, without you feeling forced to play something you don't enjoy. Children can tell when we're not having fun, even if we try to fake it.

5. "I would love to play for a few minutes. Then I will need to fold the laundry."

Sometimes children need help getting started. It often works well to play with them for 10 or 15 minutes and then back away to do something else nearby. This allows your child to play independently while also saving your sanity.

6. "Sure, I'll play! You choose the game today, and I'll choose tomorrow."

While we naturally do not share all of our young children's interests, it is important for children to get to choose what we do together some of the time. Create a system where your child chooses sometimes, and you choose other times. Once your child is confident that they will get to decide what you play together sometimes, they will likely let go of the need to always demand that you play certain games.

Bottom line:

The beauty of learning to say "no" to your child's requests to play is that you will enjoy the time you do spend playing together. No one has fun when they feel like they're being forced to do something, even if it's by a 4-year-old.

And the thing is, they can tell. Children know when we want to be there and when we're just phoning it in—we're not fooling anyone.

When I force myself to play, I imagine my toddler feels sort of how I feel when I drag my husband to the farmers market. Yes, we're doing what I wanted to do, but I can tell he's not into it and that kind of takes all the fun out of the experience.

Once you feel the freedom to decide whether or not you want to play, you can choose the times when you do feel like being silly, playing pretend or merely dropping everything to build the tallest tower ever in the whole full world.

And your child? They will know the difference. Their little heart will be so full of playing with you when you want to be there. That's what will stick with them, not all of the times you said no.

You might also like:

Learn + Play
Motherly provides information of a general nature and is designed for educational purposes only. This site does not provide medical advice, diagnosis or treatment.Your use of the site indicates your agreement to be bound by our  Terms of Use and Privacy Policy. Information on our advertising guidelines can be found here.