Started in 1996, 529 savings plans encourage families to start college savings when their kids are young. While these plans are subject to the economic conditions of the market, they do offer many benefits. For starters, every state offers at least one plan and they are very user friendly for families who may not be investment savvy.
They are very good for middle income families and families who can’t save a whole lot each month, and there’s usually a good tax advantage for state taxes, points out Cindy Bailey, Senior Policy Analyst at the College Board. It’s the route for parents to begin to look at what these costs are going to be and look at ways they can begin to provide some amount of savings toward those costs, and at least have a cushion.
Look into the 529 savings plans in your state and a couple of others to determine the one that’s best for you. Remember, these plans follow the overall stock market, so when the market is down the plan will lose as well. Yet, if you force yourself to put even a small amount into the plan each month, your forced savings will increase over time.
Beginning in October of 2011, every institution that gets federal funds will be required to have on their website a Net Price Calculator. This tool will allow families to put in information about themselves and get information back about potential financial aid packages at that school.
It’s going to be a very helpful tool across the board for institutions and families, taking the confusion out of what a school will actually cost. The calculator will help you determine how money is given out, how it is packaged, and what you might get. You will be able to get a feel for how much you will need to save when your precious toddler becomes a precocious college student!