With college costs and the associated debt graduates find themselves in after finishing school increasing at an alarming rate, students are more and more trying to connect with a new alternative source for funding – their grandparents.
And grandparents – feeling that familial obligation – are coming through when they can.
An average year’s college tuition ranges from $17,000 to $60,000 a year, and that’s without any of the extra associated costs. As a result, a recent survey by Fidelity Investments indicates more than 50% of grandparents are saving or plan to save their money to help pay for college for their grandchildren.
If you are in that group, one of the best ways to accomplish this is through a 529 plan – a tax-advantaged savings plan designed to encourage saving for future college costs. The plans are offered by states, including Florida, to allow people to invest in future educational expenses. The Florida program is offered through Florida Prepaid.
There are numerous benefits for grandparents or others to use a 529 plan to save for college. While the money in the plan is designated for the grandchild, the owner controls all of the money. This means that the owner(s) can withdrawal money for themselves, but they will have to pay a penalty fee and income tax since it won’t be used for an educational purpose. If your grandchild decides that college isn’t for them, the money can still be kept in the account for another educational reason.
529s are not only beneficial to the students who are receiving the money but it is very easy to handle for the grandparents. So maybe investing in a 529 plan is the best gift you can give your grandchildren.