3 Reasons I'm so Happy I Opened 529 Accounts for My Kids

Graduating college from a private university and then dropping out of grad school left me with over $100,000 in student loan debt. I've spent time being resentful and embarrased that I got myself into that position, but I've come to terms with two truths about my student loan situation.

First, Kaity at 18 simply didn't know any better. The thousand dollar figures I was signing my name to meant nothing to me. I didn't have someone guiding me through or educating me on financing my education (save for the enthusiastic woman in the Admissions Department encouraging me to do whatever it took. Ugh) My teenage self didn't know what my 30-year old self knows now, so there's no use in beating myself up about something I can't go back in time and change.

Second, shame and resentment are not productive actions. Working hard, saving money, and paying down my debt are productive actions. Which is what I'm trying to do currently to correct my past mistakes.

All of this is to say, the experience in being crushed by a mountain of loan debt has been crippling. It's been scary, painful, and even traumatic at times. It has impacted my family's entire lifestyle and wellbeing, which is something I do not take lightly. It's a situation that I never want my own kids to experience. So, we've begun saving for their future education needs and I've started learning why 529 accounts are 100% the way to go. Here's why:

Why I'm So Happy I Opened 529 Accounts for my Kids

  1. They earn more than a traditional savings account. A 529 is an investment account, not a savings account, so it comes with greater risk. Greater risk, but not a great risk. Educational accounts have comparitively little risk in contrast to other types of investment accounts because who wants to gamble with their kid's future? When I first opened up the boys' college savings accounts, I chose a generic savings account at a local bank. My initial investment earned me approximately $.01/month in interest. I transferred their savings into a 529 account about two months ago and in that time, the earnings have been about $1.72. When you think about that in the long-term, that's a huge amount of money I'd be losing out on!
  2. 529s offer tax advantages. Although contributions to a 529 plan are not tax-deductible, the earnings in the account continue to grow tax-free and will not be taxed when the funds are withdrawn to pay for education expenses. Your state may even offer tax incentives too!
  3. 529s can pay for more than just college. One of my concerns prior to opening the accounts was "what if my kids don't go to college?" Chuck and I have talked about the fact that we would 100% support our child's decision to opt to enroll in a trade school over a four-year college. So imagine my happy surprise when I discovered that 529 accounts can be used at some trade schools. Or if they wanted to pursue a graduate degree, the funds could be used for that too. If they didn't pursue higher education at all? The money in the account could be transferred to another beneficiary or we could even let it sit and grow for our future grandchildren.
Obviously, I'm no investment expert, but I am learning so much in my new finance position and I'm loving every minute of it. I am not at all qualified to give financial advice or recommendations, but if a 529 account sounds like something that might be a good fit for your family, I'd encourage you to visit the U.S. Securities and Exchange Commission for an in-depth overview!

What is your experience in saving for or financing college?

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