In previous articles, I covered the two different types of 529 plans – the 529 Savings Plan and the 529 Prepaid Plan. Today I’ll discuss the 529 plan that I chose for my children’s education, California’s Golden State ScholarShare College Savings Trust.
I signed up for the California 529 plan because I live in California and didn’t realize I had a choice of any of the 529 plans offered nationwide regardless of what state I live in. Silly me. Now I know better. But I like the plan and haven’t opted to move my funds elsewhere.
When I had my first daughter in 2000, I knew I wanted to start a college savings plan and had heard good things about the 529 plans. I also knew that time and compound interest would give my investments an advantage so I wanted to open an account and begin funding it right away. I did just enough research to understand the basics of the 529 plan. I found the ScholarShare website and was impressed with the information presented and that TIAA-CREF managed it. The only fee is the annual program management fee of .80%. California does not offer a tax deduction for contributions. All in all, California’s ScholarShare 529 plan seemed reasonable.
I signed up online by filling out a simple application. I needed to provide the birth date and Social Security Number of the beneficiary, my daughter, and make a contribution from my bank account.
I was offered several investment choices. I chose the age based asset allocation option which automatically varies the stocks and bonds mix based on the age of the 529’s beneficiary. The funds during the early years are invested more aggressively and as the child approaches college age, the assets are moved into safer investments such as bonds and money market funds. Applying for and setting up my 529 plan took about ten minutes.
I chose to make two $50 contributions per month. Each month, on the 1st and 15th, $50 is automatically transferred out of my checking account and into my daughter’s 529 plan. Over the years, I have increased the amount as my budget allows. In addition, I can make one time contributions when I have spare money I’d like to invest.
Navigating the ScholarShare website is simple. After logging in, I can view every contribution since inception or a range of contributions along with the price history. I also can order statements, make one time contributions, sign up for payroll deduction or add another beneficiary.
I recently added my newborn son to the California 529 plan. Now that I know more about the 529 plans, I considered plans out of my state. In doing my research, I didn’t find any that I felt would be any better than my current ScholarShare 529 plan. Once I decided to stick with ScholarShare, I wanted to make contributions even while pregnant. I found out I had to wait until my son was born and had received his Social Security Number before I could sign him up. Adding him to the account was even easier as most of the data is already entered. All I had to do was enter his name, birthday and Social Security Number, and choose an investment and contribution amount. That’s it. The college savings for each child remains separate within this single account. So it’s one account with two beneficiaries having their own separate funds.
One of the benefits of 529 plans is if my daughter doesn’t use all her college savings, I can designate those unused funds to my son or anyone else. Best of all, I have the power of time and compound interest working for me. Even though I started the 529 plan with small contributions, the savings are growing and we still have twelve more years. It’s been a painless way to save for college and a gift of a lifetime for my children.