Consider Long Term Savings When Back To School Shopping

As busy families everywhere start to think about the back to school rush, chances are good that there aren’t many parents thinking as far ahead as sending their young children off to college right now!  Especially if you’re just trying to get through the back to school shopping for your elementary students before embarking on another activity-filled school year.  The fact is though, the sooner we make time to consider college savings options for our children, the better their position will be if they should decide to get a higher education once their high school years have ended.

So what’s a busy family to do?  Most of us are cash-strapped as it is, working hard to get the necessary school supplies for this year, add to the ever-growing child’s wardrobe (so their legs aren’t poking out three inches further than the bottom of their jeans!), and keep up with the activity and sports fees as well as the family’s living expenses.

The IRS has created a college savings option called the “529 Plan”, aptly named after Section 529 of the Internal Revenue Code.  The plans are operated at the state level, but you can use funds saved in a 529 in your state toward the costs of any college around the country – meaning you don’t have to have any idea where your child will end up spending their college years when you start saving.  In fact, you don’t even have to stress too much over whether or not junior will attend college, because the plan has some really nice features built-in that give you options for the money you’ve saved if your child ends up doing something other than going to college.  For example, if you save money in a 529 plan for your child and he or she doesn’t go to college, you can either withdraw the money for non-educational expenses (and pay a penalty fee), or you can transfer the money to any other family member.  If one of your children goes to college, he or she could benefit from the siblings 529 plan funds; or the money could be transferred to cousins, aunts, uncles, or even saved for your grandchildren!

All states have at least one 529 plan available, but each state has slightly different rules and regulations for the plan.  Most states provide tax incentives to the person investing in a 529 plan, and there are federal tax laws that offer tax benefits for investing in these plans, as well.  The tax benefits combined with the ability to transfer the money fee-free to other family members are two of the best advantages of this type of college savings plan, and the reason why many families opt for a 529 plan instead of simply saving the money in a money market account or certificate of deposit.

You can enroll in a 529 plan by applying directly with the 529 plan manager in your state, or through your financial advisor.  There are two types of 529 plans – they are categorized as either a prepaid plan or a savings plan.  The savings 529 plan is similar to a 401(k) or IRA.  You can select how to invest in mutual funds and similar investments, and the 529 account will increase or decrease based on the performance of the investments you’ve selected.  The prepaid 529 plan allows you to basically “prepay” for the cost of public colleges.  If your child decides to attend college out of state or go to a private college instead of a public college, you can convert the savings to another plan that can be used for private institutions and out-of-state schools.

So, while you’re working through the back to school shopping lists for your children, it’s a good time to also consider opening a 529 plan.  The younger your child is, the more years you have to maximize those savings and earn more before they’re ready for college.  You can set up automatic deductions from your bank account to make deposits to the accounts; or you can use one of the many services that will allow you to receive contributions to your child’s 529 plan from family and friends, like  Additionally, if you are a member of, you can move your earnings through Upromise into your child’s 529 plan and get more value out of those earnings!

Trisha Wagner is a freelance writer for, where you can compare rates of checking accounts from dozens of banks in one place. Trisha writes regularly on the topics of personal finance and savings accounts.