How to save smarter for all your educational expenses
Virginia529 accounts offer flexible savings options for college and beyond.
By WP Creative Group
FEBRUARY 21, 2023
Saving up for educational expenses can be a daunting task for many families. The key, experts say, is starting early and planning ahead.
“A similar question is, ‘when’s the best time to plant a tree,’” said Paul Curley, Director of Savings and Research at ISS Market Intelligence. “The first answer is ‘10 years ago.’ And the second-best answer is ‘today.’”
This outlook is why educational savings plans like Virginia529 are a popular tool for families around the country who are looking to save for the future. A recent Sallie Mae study reported that more than 30% of families used funds from an educational savings plan to pay for college-related expenses in 2022.
Much like a Roth IRA, a 529 account works by investing your after-tax contributions into investment portfolios, and the earnings in your account grow free from federal and state taxes when used for qualifying educational expenses.
Although the specific benefits of a 529 vary by state, Virginia529 stands out as the largest 529 plan available nationwide. Virginia529 accounts are designed to be flexible, allowing families to save in them regardless of what state they live in, and use funds for a variety of different qualified uses and expenses. Family members can contribute to an existing account or open their own, and funds can be transferred easily between student beneficiaries.
With a Virginia529 account, what may seem daunting at first becomes achievable. Opening an account and setting up recurring contributions is as simple as visiting Virginia529.com, said Mary Morris, Chief Executive Officer at Virginia529.
“Setting up recurring contributions is one of my favorite ways to help families save,” Morris said. “Some people get overwhelmed thinking college is going to be too expensive for them. But even if it’s only $10 a month, [families should] set it up and make that commitment early on. It’s surprising how much difference it can make.”
Beyond traditional tuition
One of the common misconceptions about 529 accounts is that the funds must be used for traditional four-year college tuition at an in-state school. However, 529 accounts can be used for in-state, out-of-state, public or private school tuition.
“You can also use these funds for a number of international schools,” adds Curley. “Dual passport families might use it to send their child to school in England, for example. As long as the school has a FAFSA code, then one can use it anywhere in the nation or internationally as well.”
Additionally, Morris says families can use their Virginia529 accounts to cover a variety of educational expenses beyond tuition, including books, computers, housing and even meal plans.
Families can even use up to $10,000 in qualified student loan repayment — a fairly new option that benefits recent graduates.
“You can use it for four-year universities, two-year programs at a community college, or certificate programs that might last just a few months,” Morris said. “You can also use it for K-12 private school tuition, which is a small, but growing percentage. Particularly during the pandemic when a lot of kids were not having in-person school, some families chose to send them to a private school with smaller classes, smaller numbers, and more in-person instruction.”
Although you don’t have to reside in Virginia to open an account with Virginia529, there are perks for state residents, such as the Invest529’s Tuition Track Portfolio, which offers families a savings option that keeps pace with tuition inflation. Virginians also receive up to a $4,000 per account per year deduction from state income taxes for contributions to a 529 account.
“Starting early and saving often is really optimal,” said Rachel Ramos, Senior Manager at Capital Group | American Funds. “But 529s are also looked at as a lifelong-learning experience. Even if you start saving when your student is in middle or high school, a small bit of money can help pay back student loans later on or advance a second career. It really spans a broad spectrum.”
It takes a village
When it comes to saving for the future, the entire family can be involved.
Anyone 18 years or older can open a 529 account, meaning an especially determined student might choose to open a Virginia529 account for themselves, investing in their own education. Expecting parents might opt to open a Virginia529 account early on; parents of older children can start separate accounts for each child; or grandparents can open accounts as a way to leave a legacy of education for their grandchildren.
“Often grandparents in particular do this for their grandchildren, which is brilliant,” Morris said. “Maybe they didn’t have that option for their kids coming up, and they wish that they’d had a way to help them get started. Or maybe they know their adult children are stressed with buying a house or paying off student debt.”
Regardless of who opens a Virginia529 account, other loved ones can choose to contribute to that account on birthdays, holidays, or whenever gift giving is expected. This flexibility encourages a village mindset when it comes to saving for whatever educational expenses the future brings. Family members can use the Virginia529 Gift Center to purchase and deliver digital gift cards.
“One of the big trends in 529 programs in the last few years has been gifting,” said Morris. “We have a gifting portal on the Virginia529 website that makes it easier for grandparents, friends, aunts, or uncles to make contributions and help families grow what they already have.”
Virginia529 also partners with Capital Group | American Funds to offer CollegeAmerica, a savings program that comes with guidance from a financial professional, which can be particularly helpful for individuals new to investing.
“Working with a financial professional really makes a world of difference,” said Ramos. “[Advisers] can sit down and help the individual with plan selection, what investments to provide in the program, and really look at their holistic financial plan.”
Your money, always
Life happens, and college may not be the right path for everyone. Fortunately, 529 accounts allow the account owner to maintain oversight of the account assets.
“The beauty of a Virginia529 account is that the account owner maintains control,” said Ramos. “If the child decides when they graduate that they want to go on a vacation or buy a motorcycle [with the saved money], that can’t happen without the account owner’s permission. Account owners can make sure the funds are going where they need to be.”
If higher education isn’t in a student’s immediate plans, or if the student receives enough scholarships to cover their tuition, account owners can hold the funds in the Virginia529 account for their future use, such as attending graduate school, or they could always change the student on the account to another eligible family member.
“The money can move from one student to another as long as they’re a member of the same family,” said Ramos. “It can be changed to a sibling, a cousin, or down the road, if the student has their own child, it can be renamed to them, passing it along to the next generation.”
The approved uses and flexibility of 529s continues to expand alongside the evolving needs of families. Starting in 2024, families who are saving for education in 529 plans will be allowed to roll over unused funds from those accounts into Roth individual retirement accounts (IRA) without incurring tax penalties.
To open a Virginia529 account, visit virginia529.com today.
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