It’s that time of year. Time to build better habits — including, perhaps, healthier financial habits. Time to reassess your priorities for the coming year. And time to finally knock some items off the to-do list that have been buried on your desk since before the holidays.
It’s also the time of year when tax statements start flooding in. Among them, my least favorite: student loan interest statements. They’re an uncomfortable annual reminder of just how much it costs to finance higher education.
For many of us, student loan debt is a fact of life. But it doesn’t have to be such a burden for our kids.
Now that we have two children, my husband and I would like to provide for them — not just now, for their day-to-day needs and (in a few years) for preschool tuition, music lessons, sports teams and the like. We’d also like to provide for them down the road, when it’s time for them to pursue a college education. And the time to start planning for that is now.
Making The Smart Decision: Why It’s A No-Brainer
Let’s be honest: Unless you have a business or financial background, sorting through various savings and investment vehicles can be daunting. You might be tempted to just open up a bank account for your kid and let that money sit dormant. Yet years down the road, when tuition (and inflation) may have skyrocketed, that money might not even cover a semester’s worth of books for your kid.
Minnesota College Savings Plan provides a way for that same money to go a lot farther toward financing your child’s education. As a state-sponsored 529 college savings plan, it offers significant tax benefits (including income, estate and gift tax savings). Funds used for college education aren’t subject to income tax. You can easily manage those funds online, choosing from a range of professionally managed investment options to fit your needs and goals.
The plan makes it easy for others to contribute — grandparents, relatives, godparents and anyone else who wants to provide a meaningful investment in your kid’s future. And if you end up having a rock-star child whose education is 100 percent financed by scholarships (we can all dream!), you can use the leftover funds for another child (or qualifying family member).
Some other advantages of this plan:
- You don’t have to pay taxes on qualified withdrawals (which cover tuition, fees, supplies, equipment, and room and board at eligible institutions across the country).
- You can use it at basically any school that has a financial aid program nationwide and abroad.
- You can open an account for each child.
- No fees – no cancellation, application, or change in beneficiary fees.
- You only need as little as $25 to get started with your first deposit.
You certainly don’t have to be wealthy to start saving for your child’s future. Every dollar counts. Many of us are fortunate to receive money from friends and family after the birth of a child (or on subsequent birthdays). Instead of letting that money sit in a bank account earning pocket change, why not put it to work for your child’s future, starting something that will grow along with them?
Don’t Put It Off
This is one thing you shouldn’t let slide for another year. I’m no financial guru, but I do know that the sooner you start investing, the greater your returns down the road. And even if your kids are older, it’s never too late to start saving.
Minnesota College Savings Plan makes it easy to start now (and have the satisfaction of scratching one more item off your to-do list). You can create an account online in only 15 minutes. And, just like you use automatic payroll deductions for other pretax accounts, you can set up direct deposits from your paycheck (which you can change or stop at any time). The account is also easy to open and can make contributions online or by mail. It truly couldn’t get any easier.
I don’t know what the economy will look like 16 years down the road when our eldest starts applying for college. But I do know that having funds set aside will open more doors for him — and, likewise, for my daughter (who’s only a year on his heels). By planting that seed now, we can have peace of mind knowing they’ll reap the benefits down the road. Investing in their future is not just a responsible financial decision; it’s also a rewarding one.