What are the benefits of a student savings account?

Saving for the children before they reach college is the wisest thing to do for any parent.  The parents have to start worrying about the expenses they would incur when the children start college.  So, unless the parent starts saving from the time the children are small, it could become virtually impossible to fund their children’s education.  No one is aware of exactly how much it would cost to put one’s child in college as college education is very expensive.  Then how can one save for college when one does not even know for sure as to how much it is going to cost.  Hence the student’s savings account is the best option for parents where they can open the account and save money for the child’s higher education. 

The 529 education plan is a savings plan operated by an educational institution or a state and it is designed to help set aside a certain sum for higher education as well as college expenses.  These plans are of two categories – the savings plan or the prepaid plan.  A few states offer tax incentives for those who invest in these plans.

The 529 Education Plan Account is an ideal plan which can help people save a good sum of money and also, avoid the penalties that are imposed by the government.  This plan not only offers savings but tax redemption as well and hence beneficial to both parents and students.  The 529 plan is based on the tuition program under the Internal Revenue Service.  Also if the amount put away is up to $24,000 per annum then the federal gift tax could also be avoided in most cases.  By saving these sums of money one could again use it for the child’s college expenses.  Most states have the 529 plan available.  These plans differ from state to state and these plans could be used to meet the expenses of colleges nationwide.  Most often it does not matter which state the student is in, the choice of college will not get affected.

The monetary gains are pretty substantial since these funds are exempted from tax.  The rate of interest that is offered by most of the banks on these accounts is quite high. These returns help in creating substantial savings for the child.  Parents who start saving early rarely feel the heat during the payment time in college.  Hence these timely investments help parents get out of embarrassing as well as difficult situations.