It’s graduation season, which has me thinking so much about the future. Owen is one year away from Kindergarten and I know I will blink and he’ll suddenly be a senior in high school getting ready to go off to college. So I recently asked Owen what he wanted to be when he grew up and he said he wanted to be a doctor helping people in the ambulance. I immediately heard “cha-ching” because medical school is not cheap. But I quickly reminded myself that I am supporting those dreams by opening and regularly contributing to his 529 plan. His dreams may change but regardless of what career path he decides, we’ll be prepared to support those dreams.
Any other parents thinking about your kid(s) dreams this graduation season? I know I can’t be alone. If you are, I’m glad you’re here because I want to share some benefits to opening a 529 account to support those dreams as we head into 529 Day (May 29!)
What is Ohio’s 529 College Savings Plan?
Ohio’s 529 College Savings Plan is not your typical savings account. It is similar to a 401(k) in that it generally invests your contribution in mutual fund-based investments where your account value is based on investment performance. So it truly is an investment in your child’s future. They also offer options for every comfort level when it comes to risk, even FDIC-insured tax-free bank accounts. The wonderful thing about Ohio’s 529 plan is that families in any state can take advantage of it and the money saved in the plan can be used at any college, university, or educational institution that accepts federal financial aid.
What are the benefits?
There are several benefits in opening an Ohio 529 account. The biggest benefit, in my opinion, is that you save more over time than you would in a traditional savings account. With Owen being 3 years old, we have a ways to go until he graduates high school. This gives us plenty of time for us to contribute to his 529 and see it grow so that we are in good standing by the time he graduates.
Consider this example:
The average 2019 federal tax refund for Ohioans was $2,510. By adding $2,510 a year to an Ohio 529 account, you could cover almost 38 percent of college costs at an Ohio public university, based on 18 years at 6% growth. *Assumes growth rate of 6% in the 529 plan and a bank savings interest rate of .09% as reported by the Federal Reserve Bank of St. Louis 1/2020. Also important to note that this is only a projection, and individual results could be lower or higher, much like mutual funds in a 401K plan.
Ohio’s 529 College Advantage has several tools and education for families to see how the 529 plan can work for them. My personal favorite is the College Savings Planner which allows you to look at your college savings goals, projected costs and estimate what you’d need to save monthly to meet your objective. This has been helpful for me because I have a goal in mind and it allows me to see what I need to do in order to achieve that goal.
Are you ready to begin financially planning for your child’s future or interested in learning more?
Visit www.collegeadvantage.com, there you can open an account online, browse their very informative blog posts (like this fun 529 quiz!), and even utilize the College Savings Planner. If you have any questions please reach out! I am more than happy to share more about my personal experience with Ohio’s 529 plan.