529 Plan and College Savings

Archive for July, 2008

Question: 529: education savings accounts?

I am an undergraduate students who hopefully will be transfering to University this fall 2010. i have been also thinking of doing investment. my problems are:

Should i invest my money in regular taxable accounts or 529 accounts?

i have herd things about 529, but since i dont have money to go to Univ., is either i will be depending on FAFSA, grants, or loans.

my plan is to have 529 until i graduate and pay off my all loans with 529. Is that possible?

thank you so much for all answers and links will be appriciated.

Answer: A 529 Plan will only benefit you if you start it at an early age, and when I say early I mean your parents should have set up the account for you. If you are in your teens you are way too late. The 529 Plan is money that is invested for you as a child because it takes about ten to twenty years for it to grow with money that is put into it, assuming that there is no crash in the market. The best thing for you to do is to create a savings account and set aside some money each month into that account, let’s say about $300 a month. That will allow you some time to raise money during your years of study so that you have money to pay back the loan in payments. In other words, you are creating some breathing space for when you get out of college and find a job that pays well and your day to day bills don’t pile up with your school loan. The last thing you would want is to fail on paying the loan on time and severely mess up your credit scores creating a whole other series of problems in the future when wanting to buy a house or car. Protect your credit score! Start saving emergency money for that loan when you have to pay it in the future and you don’t feel the squeeze of too many bills. For some more advice, read the following. It is the advice I gave another person about saving and investing which seems to suit you….

There is no fast way to make money, keep that in mind because I speak from experience. The best way for you to make money if you are serious about it, is by opening a very basic savings account and depositing that extra $400 a month in the account. Your first objective will be to gather and raise capital. In three years you will accumulate $14,400 of saved money and you will have enough money to put it all in a CD or Certificate of Deposit at the bank at the best interest rate being offered. Most banks won’t give you the best rate unless you have at least $10,000. Now most of time the best CD’s are the ones with 12 month to 36 month terms, which means you won’t have access to that money for that time. But during that time the bank will pay you interest. Let’s say if you could get 2.00% interest rate for 12 months on $14,400 that is compounded daily, you will end up with $14,688 by the end of the 12 months. That is a gain guaranteed gain of $288.00. That not might seem like much, but continue adding each year the $400 a month for 5 years and you will end up with $36,078. That is enough to start a small business or buy a new car in five years. By the way, I am a banker and this is how we do it.

DaveWalking 2009 RMCAC College Fair (Video 2)