In the book I just read and reviewed - Smart and Simple Financial Strategies for Busy People by Jane Bryant Quinn - there was a lot of good information about 529 plans. I thought I would share the key points from the book and some research I did on my own. One of my New Year’s Resolutions is to start saving for my kid’s college, so this info came as a real help. I know I have 16 years until my first daughter goes to college, but like everyone says, it is always better to start earlier than later.

The best websites to start for good information:

Although these websites give you all the information you will probably need, I will at least tell you the benefit of 529 plans. The money that you make off this account - dividends, interest, and capital gains - are tax-deductible if you use them for higher education. In 25 states and the District of Columbia, you can also get a tax deduction on your state tax. You can head here and search each state to see the benefits and incentives for each state’s plans. For example, Indiana gives 20% tax credit, up to $1000 per year. Check it out as some states, like Michigan, match some of the money in the account.

The main thing you need to watch with these accounts are the fees. If you get in a high-fee savings plan, you might be paying more in fees than the tax break you would get out of it. No matter what state you are in, you can join any state’s plan. It is suggested that you join your own state’s plan, but if the fees make it not a good investment, then go with a different state or go with a completely different program. A Coverdell Education Savings Account (ESA) works like a 529, but you can’t invest more than $2000 a year (up to the child is 18). You do not get state tax breaks and their are income limitations.

A good book for information on 529 Savings Plans is The Best Way to Save for College 2007: A Complete Guide to 529 Plans (Best Way to Save for College) by Joseph F. Hurley.

Here are some college calculators to see how much you might have to spend. Since I am at least 16 years away (unless she is a super genius), I am not too concerned about the number. I will be when it gets closer and when I found out what schools might be good for her, but until then it does not seem like it would be relevant for me.

I am going to look into setting up my Indiana 529 Plan for my daughter, and I will let everyone know how it goes.

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