The Benefits of Saving for College Now and Later

Have you started saving for your child’s college education? Or worse. Your children’s college educations? If you’re like me, even before that little bundle of joy was born, you had every intention of getting this important financial investment rolling, but finding the time and money has been a challenge. Recently though, I’ve been motivated more than ever, to the point of skipping that morning coffee, denying myself a new handbag or saying no to a nice dinner out (okay, maybe not the coffee).

Right now, state lawmakers are considering a bill (SB1176) that would increase the tax deduction in relation to Arizona’s 529 College Savings Plans. Currently, individuals can claim up to $750 on their state taxes and married couples can claim up to $1,500. If SB1176 passes, those numbers increase dramatically to $2,000 and $4,000.

If you’ve never heard of a 529 College Savings Plan, let me explain. The majority of states, including Arizona, offer this program through financial institutions. Families including parents, grandparents, aunts and uncles, third cousin twice removed (you get the point) can put money in an account for a child who will eventually go to college. The best part… the money grows tax-free! That means when the child is ready to head off to higher learning and pull out the cash, he or she does not have to pay Uncle Sam. How can you pass that up? I know I can’t, but the key is to start saving early. The money that’s deposited in a 529 needs time to grow, and the more time, the better.

So where do you start? That’s exactly where I am right now. I’m currently looking at which Arizona financial institutions offer a 529. The state’s website is a wealth of information. Check it out. It has everything from the benefits of starting a 529, to some interesting planning tools, to exactly what I need… links to those financial institutions. My goal is to set-up a 529 by the time my little one goes to preschool in the fall. Wow! Did I just say that? I guess I am committed now and you are my witnesses. I’ll let you know what happens.

Have you set-up a college savings plan for your kids? If so, what was the hardest part?