Life gets a lot more expensive when you have kids, and if you’re feeling overwhelmed by the day-to-day costs, you are probably very intimidated by the idea of starting a college savings plan. College is expensive, and there’s no telling whether your child will definitely decide to go to college or not, but knowing that there is money saved up is definitely a fantastic motivator. Either way, you want to be sure that you make the most out of your plan, and that starts with knowing how they work. Here are five factors to consider before starting a 529 plan.
- Review Your Program Disclosure Statement (PDS)
Every 529 plan will come with a program disclosure statement that is included in the application. This isn’t just one of those long lists of terms and conditions that you can confidently scroll through, check the box and then continue without worrying. You want to read this statement thoroughly, because every plan will have a different list of terms and conditions, and it’s imperative for you to understand them thoroughly.
- You Can Only Assign a Single Account Owner
If you and your spouse are opening the account together, it’s important to note that there can only be one account owner named. Depending on your situation, you may want to assign the account to one spouse and manage your individual contributions privately, or you can each open your own account. Under no condition should you assign the child as the account owner.
- You Will Need to Assign a Beneficiary
Your child should be named as the beneficiary. This means that the funds will be dispensed for their education, but they will not have control over the withdrawals of those funds. If for some reason your child decides not to go to college, you can always change the name of the beneficiary. If you want to start contributing to the account before your child is born, you can name yourself as both account owner and beneficiary and change the beneficiary later.
- You Will Need to Assign a Successor
If for any reason something should happen to you, then the beneficiary will not become the account owner, you will need to name a successor to the account. Just like you, this person will only be allowed to withdraw the funds for higher education expenses incurred by the beneficiary. These funds can be spent at any kind of public or private college institution, from your local community college to Washington State University.
- Making Your First Contribution
Once you have considered all the names that will be assigned to the account, you are ready to make your first contribution. Depending on the type of account you choose, the minimum contribution might be anywhere from $15 to $1000, so you can choose any kind of account based on your current income. Once you do make that first contribution, you want to set your deposits on auto-pay so that you can start accruing money in your account without even thinking about it. Just be sure to check the account every year or so to make sure that you are on the right track to meeting your goals.