If you are a parent or grandparent and plan to pay for a child’s education consider the benefits of a 529 Savings plan.  Because higher education can be so costly, congress has allowed states to sponsor college savings plans for investors wise enough to plan for the future; these are called 529 savings accounts.  By saving in a 529 account you can avoid ever paying taxes on the growth of the account. 

What are the disadvantages to a 529 plan?  Before allocating money to a 529 account, be sure you are committed to paying for somebody’s education; if money is taken out for any other purpose you will pay a 10% penalty and you will owe taxes on any growth.  In a 529 plan you will also be limited in investment choices, depending on which State plan you choose.  The ScholarShare® College Savings Plan is the 529 Plan sponsored by California; it is run by Fidelity® and investment options range from equities to money markets.

One of the most attractive features of this method of college saving is that you, the person saving the money, retains custody of the account.  You must name a beneficiary of the account (the person who’s college is being saved for); but you may change the beneficiary in the future.  So if a child turns rotten, undeserving, or has no need of college, the beneficiary of the account could be renamed to his or her sibling, cousin, or offspring at your discretion.

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