WASHINGTON - It's one of the most daunting tasks for parents, saving for college. There is some good news for families that are plugging money into 529 plans, they're at a record high.
Americans have $227 billion stashed in 529 plans. It's the highest on record, and it's also up by a solid, 19% last year.
A 529 college savings plan is an investment. It's like a 401K, or IRA, but for college.
You pick your plan, they're offered by almost every state. You choose how you want your money invested. Most people base allocations on age, so the older the child gets, the more conservative the investment gets.
But here's the key, the investment grows tax-free, and when the family withdraws the money come college-time, it's also tax-free.
529 plans are at an all-time high because the stock market has been doing well and families are saving more.
But it's still not enough. The average 529 balance is about $19,000. Tuition, fees, room and board at a 4 year public school is $18,000 and that's just for one year.
Still, saving something is better than saving nothing.
In most plans, your choice of school is not affected by the state your 529 savings plan is from. You can be a California resident, invest in a Vermont plan, and send your student to college in North Carolina.
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