Saving for your child’s college education is one of the most worthwhile things you can do with your personal finances, but there are so many types of college savings choices that it can feel overwhelming. A 529 college savings plan is a very smart choice, and it's actually much simpler than you may think.
What's a 529 college savings plan? Here are two answers from the Securities and Exchange Commision's "Introduction to 529 Plans" website:
A 529 plan is a tax-advantaged college savings plan
These plans are sponsored by states, state agencies, or educational institutions and are designed to cover future college costs. Tax advantaged means that contributions — in some cases — can reduce your taxable income.
529 plans include both "pre-paid tuition" plans and "college savings" plans
The pre-paid tuition 529 plan allows you to purchase units at participating colleges for future tuition. On the other hand, the college savings 529 plan allows you to create an account for the student which can generally be used to pay for any college or university.
If you'd like to set up a 529 college savings account, it's best to speak with an accountant or a financial advisor.
An Introduction to 529 Plans [U.S. Securities and Exchange Commission]
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