Benefits of a 529 College Savings Plan

You save for retirement with a 401k plan. You save for unseen accidents with a savings account attached to your checking. And if you have a child, you save for college with a 529 plan. It's simple. Nine out of ten dentists agree that for most parents and future students, state run 529 college savings plans are the absolute best way to save for future college expenses.

No Taxes

Unlike personal investments and GoFundMe accounts, which will be taxed upon withdrawal of funds, the government does not tax 529 college savings accounts. This means that any money you put into the account, is protected against Uncle Sam's pocket book. The only restriction is that the money in this account must be used for qualified college expenses, so no funny business ::cough::cough:: Vegas.

In the event you do legitimately need to withdraw the funds for non-qualified expenses - like if your kid decides to not go to college - you will be taxed, but only on your earnings, never on the amount you originally contributed.

Minimal Impact on Financial Aid Eligibility

A 529 plan is the most effective way to save for college, while having the smallest impact on aide eligibility. The rate of available funds to pay for college caps out at a max of 5.64% of the 529 account balance, as opposed to the 20% cap on a traditional savings account held in the child's name. That means, if you have $10,000 in your Scholar Raise savings account, your need-based eligibility would only be reduced by $564, whereas if you had $10,000 in a regular savings account, your need-based eligibility would be reduced by a whopping $2,000. Need we say more?

Earn Interest

Basically this is free money. A 529 plan works the same as a mutual fund by investing in a diverse series of assets. The returns on your investment are then reinvested along with the original investment - earning their own incremental returns over time. In other words, if you put in money now, you'll have even more money later (literally, out of thin air). See the section on "compounding returns" below.

Compounding Returns

Let's say you generate 6% returns on $1,000. Next year, you can earn interest on both the $1,000 you started with and the earned $60. This reinvestment of earnings is called compounding returns, and it's a positive feedback loop of awesomeness. It's just another way of saying a little bit of money socked away now will become a lot more money later.

Backed by Washington

When Congress created 529 plans by writing them into the Internal Revenue Code, they made a promise to Americans to value, protect and make saving for a college education accessible. Because the plans are state-run and backed by the federal government, your funds are safe no matter what happens to Scholar Raise. That said, we really like our jobs and have no intention of going anywhere anytime soon.

So what are you waiting for? You can set up your 529 plan and be on your way to drastically offsetting your kid's student debt in less time than it took to read this blog post. Fo' real.