As the school year kicks off, September is the perfect moment to recognize College Savings Month and to answer a question many families have: ‘How do I even start saving for college?’ The truth is, starting small makes a big difference. Even $25 a month can be the foundation of a solid college savings plan.”
What’s a 529 Plan?
A 529 plan is a tax-advantaged savings account designed specifically for education expenses. Think of it as a financial foundation for the future. Here’s why families choose them:
- Tax benefits: Money in a 529 grows tax-deferred, and qualified withdrawals (for tuition, books, housing, and more) are tax-free.
- Flexibility: It’s not just for four-year universities. A 529 can cover trade schools, community colleges, apprenticeship programs, and even some K–12 expenses.
- Open to everyone: Parents, grandparents, relatives, or even family friends can open or contribute to a 529 plan, bolstering opportunities for students to receive financial relief while in university.
How to Open a 529 Plan
Starting a 529 plan may sound like a lot of work, but don’t worry, the process is actually straightforward and doesn’t require a finance degree.
To get started:
- Pick a plan. Most states offer their own 529 plan, and some provide state tax breaks for using them. But you can shop around for better investment options or lower fees. Keep in mind that if you have a plan from another state, you’ll need to confirm that the colleges you’re looking at accept that plan.
- Choose your beneficiary. The beneficiary is simply who the account is for. This could be your child, grandchild, or even yourself if you’re pursuing more education.
- Start Small. Many plans accept contributions as low as $25. The amount matters less than building the habit.
- Select Investments. Options range from conservative to growth-focused, and some automatically adjust as college nears.
- Automate Contributions. Monthly deposits keep you consistent without extra effort.
Already in College? It’s Not Too Late
Many families and individuals don’t realize that you can still open and use a 529 plan even if the student is already in college. Even with just a few semesters left, a 529 plan can significantly help alleviate the pressure of collegiate expenses.
- Immediate benefits
Even short-term contributions can be used for upcoming semesters. In many states, families may also get a state tax deduction or credit right away.
- Tax-free withdrawal
Even if the account doesn’t grow much in a short time, the funds can still be withdrawn tax-free for tuition, books, housing, or other qualified expenses.
- Graduate school counts
Planning beyond undergrad? A 529 can also help cover grad school, law school, medical school, and certain professional programs.
The bottom line? A 529 plan is most powerful the earlier you start, but it’s never too late to take advantage of the benefits.
The Power of Starting Now
The cost of higher education can feel intimidating, but a 529 plan is a practical way to prepare. Every contribution, whether it covers a semester’s worth of books or helps chip away at tuition, reduces the burden of student loans down the road.
This College Savings Month, remember: the most important step is the first one. A small, steady investment today can open doors to bigger opportunities tomorrow.
A Step Beyond Savings: Building Financial Confidence
At Sqwire, we know saving for college is only part of the picture. That’s why we offer financial education courses designed for college students. From budgeting and borrowing to avoiding debt traps, our courses equip students to step into adulthood with confidence.