Consumer Reports explains how a 529 college savings plan can help and what to keep in mind before withdrawing the funds.
As a new school year begins for students around the country, many parents reflect on how fast time passes. And for many parents whose kids will soon be headed off to college, one of their biggest concerns is paying for their education.
But many families don’t take advantage of this opportunity. In fact, only 30 percent of families used a 529 account to help pay for college this year, according to a 2023 study by Sallie Mae. For example, if you opened a 529 account for a newborn this year and contributed about $250 a month, you’d have more than $113,000 when your child heads off to college in 18 years. That’s more than double your $54,000 investment.
A few things to keep in mind: You need to spend the money in the same tax year, not school year, that you make the withdrawal. And be sure to keep all your receipts in case the IRS has questions later.
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