What is 529 Day and Why Is It Important?

May 29 is celebrated across the United States as 529 days or 529 College Savings Day. It was introduced to raise awareness of these schemes and encourage families to start saving for future education expenses.

The 529 plan is an education provision plan. It is designed to help families save on future education costs.

What is the 529 plan?

529 plans are great investment tools for education. These plans are different from other types of savings plans. 529 savings plans provide significant tax incentives to help families prepare for future school expenditures. Tax-free growth and tax-free withdrawals help parents keep up with the rising costs of education.

There are two types of 529 plans - 529 savings plans and 529 prepaid plans. With a 529 savings plan, Funds in the account grow through various investment options. A 529 prepaid plan allows families to prepay for future college expenses at current rates. The main attraction of this plan is that it protects the parents from increased costs in the future.

Anyone can open a 529 savings account for the specified beneficiary. Any of your family and friends can contribute to the account. The funds in the account can only be used to cover the educational expenses of the beneficiary. This includes tuition, room, board, textbooks and other educational expenses. Only money withdrawn to pay for the beneficiary's education is tax-deductible. 

Why is this important?

Every family knows that it is important to save early for the education of their children. Traditional savings accounts do not offer incentives for parents to save for college. And because 529 plans are so uncommon, few families know about them. National Day 529 is important because it raises awareness of these plans. On this day, organizations make great efforts to create campaigns to highlight the features and benefits of these plans. Their goal is to make education accessible to more families across America.

Education Savings Plans

1. A little savings goes a long way.

Saving a small amount each month can make a big difference in crying. These small amounts accumulate. When it's time to pay off to college, it can dramatically reduce student loan debt.

2. 529 plans are not just for a college degree.

The funds cover a wide range of educational expenses. Eligible expenses include tuition fees at private or public colleges, vocational schools, and technical colleges for two or four years. Funding eligibility covers the costs of education from kindergarten through 12th grade, and the costs of services for people with special needs.

3. You are not restricted to investing in 529 savings plans in your state.

You can invest in any 529 state plan. Eligibility requirements, minimum investment, and benefits vary from state to state. You can compare different state plans and choose to invest in the plan that suits you best.

4. There are no restrictions in the state in which the beneficiary can study.

The recipient may live in one state, have a 529 plan in another, and attend school in a third.

5. There are no restrictions on who can be an account holder or who can be a beneficiary.

 However, each account can only have one beneficiary so each child has their own account.

6. There is no maximum age for plan beneficiaries.

This means that you can also use the money to cover your educational expenses, or you can use it to pay for an advanced degree or professional retraining. The only limitation is that you must be enrolled in an eligible school.

7. There are tax advantages.

Many states offer income tax deductions or credits for 529 plan contributions. This can play a role in choosing a plan, so be sure to check if the deductions apply to your state before choosing a state-specific plan.

8. Learn about employer contribution matches.

Many employers match employee contributions to 529 education accounts up to a point. It's worth checking if this is part of your employee benefits package because this extra contribution adds significantly to your savings.

9. You may be eligible for 529 scholarships.

This is if you meet certain income requirements. Some states have grant programs that match contributions to 529 accounts in dollar or percentage terms. Countries usually limit this to their 529 plans. Their cooperation may also be a limit.

10. Anyone can give a gift.

Once a beneficiary's 529 account is opened, all family members and friends can directly contribute gifts to the account. This is a great way to help the beneficiary finance their education while reducing the amount they will need to take out for student loans.

11. The account is transferable.

If the original beneficiary of the account decides not to use the financing, it can be transferred to another beneficiary, so that the money is not lost.

Opening a 529 account for a child, relative or friend is a great way to celebrate May 29th. If you know someone who is saving to go to college, help them contribute to their savings account, and help make college more affordable. There is no minimum contribution amount. The smallest amount can accumulate over time and make a big difference.