In this economy, we have seen many people liquidating their 529 savings accounts to pay everyday living expenses. This certainly can be heart breaking but fortunately it is quite easy to do and the tax implications and penalties may not be as bad as you think they will be.

Nowadays, many are aware that 529 college savings plan is a wonderful way to begin saving for your child’s education and, every US state has already at least one 529 plan available. However, there are still some drawbacks of 529 college savings.

Although financial experts predict that congress will extend the 529 plan tax breaks, you will end up owing capital gains taxes on the earning if it does not.

Besides, expenses and fees is a confused problem. In fact, these can be seen as the biggest drawback to any fund investment. The dreaded fees and expenses you just can’t seem get away from. Just so you know every plan has a fee embedded somewhere. And that is how the investment manager makes their money. You will have to pay management fees on your account which can eat into your earnings.

Not only that, investment control is one of the negative aspects of 529 college savings plan. As the choices you have for investing your 529 account funds are determined by the plan’s investment manager. But on the bright side, a lot of states these days are now broadening their investment options and offering a wider range of goals and risk levels.

Related Posts

• April 13, 2010 -- Personal Financial Planning Guide in Recession (0)

The 529 plan can be funded with up to $60,000 per beneficiary per year, the beneficiary can be changed and the account is controlled by the parents. For financial aid purposes the account is considered an asset of the parents and not the child which provides a lower weighting in the financial aid process. I highly recommend that every parent and child research and understand the financial aid process.

Obviously, the 529 college savings plan provides key advantages in savings. At first, the earnings are allowed to accumulate tax-free. Besides, there is a 10% tax penalty on the earnings if the funds are used for purposes other qualified expenses. I like the penalty for two reasons, it is more difficult to withdraw money when you have to pay a penalty and even harder to tell the kids your new boat was once their college fund.

The 529 Plan is also an excellent estate planning option for the grandparents since they can use the annual gift exclusion of $12,000 to fund a non-taxable gift or can elect to fund up to $60,000 with a special five-year election. A couple can fund twice these amounts. For most of us, an automatic deduction of a much lower amount is the most likely mode of funding.

By visiting some comparison sites, you can examine different college savings plans, and choose one without commissions or with low commissions and low annual fees, which is a good way to keep more money in the 529 college plans. These will impact how much money you will have when your child ends up going to college. There may be an annual asset management fee or potentially yearly maintenance fees.

However, although parents might like the idea of saving money, students may not be as excited. Most students want to enjoy their college years because they can work for the rest of their lives and college is just a short chapter, compared with their whole life. At this time, a 529 college plan is becoming more valuable indeed.

Related Posts

• April 10, 2010 -- Prepaid and Savings Plans – Two Types of 529 College Plans (0)

So, for all college students, it is very important to take control of their finances now if they want the financial future to be bright.

The following are some tips that can help you with your finances to avoid any college financial disasters. Here are some useful tips on mastering your personal finance. If you are continuing your college life, these 5 tips will be helpful indeed.

Avoid using credit cards

Once you get a credit card it can be all to easy to start racking up the credit card debt. This is a bad way to start out and you will probably end up with bad credit if you are using credit cards all of the time. So, you’d better choose one debit card because you can know your expenses easily.

If you must use credit cards, remember that there are many chances to apply for credit in college. Make sure you understand the benefits and harm of credit.

Look for new ways to save

It is very important to be prepared and build for your savings during college life. Try to put your money aside whenever you can.

Many college students don’t realize how important saving really is, but if you can start saving while you are in college, you can reap from great benefits when you are older. Saving now will get you in the habit of saving, you will earn money from the money you save.

Pay off the balance regularly

If you have a credit card, it is also important that you pay off your balance each month. Leaving a balance on the card can result in you paying extra money on interest, so you will save money if you pay off the balance every month.

This will also keep you from getting in credit card debt over your head as well.

Related Posts

• October 3, 2011 -- Business Credit Cards for Your Employees (0)
• March 22, 2010 -- 5 College Students Money Management Tips (0)
• March 17, 2010 -- How Many Credit Cards Do You Really Need? (6)

But have you heard that there are actually two types of 529 college plans? Yes, 529 plans are usually categorized as either prepaid or savings plans.

A prepaid plan (or called a Prepaid Tuition Plan) that basically allows a person to pre-purchase a tuition fee at the current tuition rates that later on will be paid out when the designated beneficiary goes to college and start enrollment. This first type can be administered by either states or colleges themselves.

However, a savings plan can only be administered by the state. Account earnings in this type of plan are based on the performance of your current underlying investments; which typically, are your mutual funds. The plan will offer you several investment options from which to choose. Your account will go up or down in value based on the performance of the particular option you select. Currently, Washington D.C. and 49 other states offer the Savings Plan. This type of plan offer a variety of age based options for investment wherein your underlying investment increases as your designated beneficiary gets closer to the time he or she enters college.

In fact, for educational institutions, they can only offer a 529 prepaid plan but not a 529 savings plan. Of course, with the help of the 529 college plan, saving and paying for college has never been easier.

Related Posts

• April 16, 2010 -- Start College Savings with 529 College Savings Plans (2)

There are 5 simple strategies that can be used in colleges to save you money.

1. Track your money

If you can keep track of your daily expense, then you can form a good habit of spending money regularly. You see, detailed money spending records will prevent you from getting overdrawn at the bank thus encourage you to over spend beyond your budget.

2. Keep only one major credit card and use it sparingly

Set your own credit line and don’t charge more than you can comfortably repay. Pay cash when you can and if you like the convenience of plastic, check into getting a bank debit card.

3. Make up saving habit at first

If you decide you must have that gadgets that you ever wanted, so try your best to save enough money for it and pay the full amount in cash when you buy it later.

Besides, try to build an emergency fund and save change in a piggy bank in case of some unexpected troubles. For example, you can just deposit $2.00 a week from paychecks in a savings account when you cash your check.

4. Ask for help when you need it

If you have just met a financial disaster, remember to let your parents know yo are getting into trouble. At the same time, you can also use your emergency funds that you have built before.

5. Look ahead

Whether it’s a road trip with friends or an auto insurance bill, if you know a big expense is coming, start putting some money aside to pay for it.

So, now, get your personal money management plan started today following the 5 tips above.

Related Posts

• April 11, 2010 -- 3 Personal Finance Tips for College Students (0)