May 29 is known as College Savings Day, a play on the date as it relates to the college savings account’s formal name, the 529 Savings Plan.
Research has shown that post-secondary education can lead to increased income and better job prospects, but the rising cost of tuition has become an issue for many families.
In fact, a recent report finds that since 2009, Arizona families have watched state school tuition prices jump 91.3 percent, the largest increase in the country. In other words, education is pricey, and if you want your child to graduate college debt-free (or as close to debt-free as possible), you might consider saving now.
The benefit of doing this with a 529 account is it was created specifically for the purpose of helping families anticipate the total cost of college. Here’s a few more reasons why a 529 account is worth considering:
College is expensive. The earlier that you start saving means more time to allow your savings to work for you. Even saving small amounts will eventually gain larger dividends down the road.
Cover more than tuition. 529 savings accounts can be used to pay for all the costs associated with school including textbooks, tools, computers, and other necessary materials.
Use towards technical education. In addition to tuition and fees at public or private colleges, 529 savings can also be used towards trade schools, including culinary schools, technical colleges, and other programs. These types of schools are becoming increasingly popular due to the needed skills they can teach as well as the rising cost of traditional universities.
Tax benefits. The state of Arizona provides an annual Arizona state income tax deduction for 529 plan contributions of up to $2,000 for individual tax filers, and up to $4,000 for married couples filing jointly. (Please consult your tax advisor regarding potential tax benefits. All information provided here is intended as a convenient source of information. The information is general in nature, is not complete, and may not apply to your specific situation.)
Lower student debt. A 529 savings account can help relieve the burden of student loans and lower the amount borrowed.
Flexibility. There are typically two different types of 529 savings accounts: the Money Market Savings and the 1-Year Time Savings account. The Money Market option is a liquid account that allows deposits and withdrawals at any time. The 1-Year Time Savings option is a time account that offers low-risk investment opportunities and higher interest rates by locking in your deposits for a specified period of time.
It’s easy. With most banks, including FirstBank, you can open a 529 savings account online in less than 5 minutes.
To help you get started, FirstBank will give you $50 for college when you open a FirstBank 529 account with a minimum of $50 and set up automatic transfers into the account.
-Joel Johnson is president of East Valley Market for FirstBank.