Three tips to make the most of your 529 savings.
For many children college will be one of the most influential experiences of their lives.
It's where they'll expand their minds
discover who they are, gain knowledge
and begin to build a future.
It's also expensive. That's why saving now is so important.
What can you do to increase your chances at success?
Check out these three tips.
One: start early. Like with any goal
the earlier you save, the better. The longer you keep your money invested
the more time it has to add up and potentially grow.
Why's that?
Introducing the power of compounding.
Compounding happens when you continually reinvest your returns
and those returns earn more returns and so on.
To demonstrate, let's look at a hypothetical example.
Let's say you set aside twelve hundred dollars a year or one hundred dollars a month
in a tax-free account such as a 529 college savings plan.
That's a total investment of 21,600 dollars over 18 years.
But if your account earns five percent a year
you'll actually have about 35,400 dollars at the end of 18 years.
That's a big difference. Save now
and thank yourself later.
Two: invest regularly.
It's not enough to save early. It also helps to invest often.
A lot of 529 plans offer ways to automate your savings
which makes it easy.
Consider setting up the schedule for moving money between your bank account
and your 529 account with an automatic investment plan.
Or, if your employer offers payroll deduction
you can save for college with every paycheck.
Let's look at why it pays to invest regularly.
Remember that one hundred dollars you were setting aside each month?
What happens if you forget to do so for, say, three months out of the year?
Instead of putting aside twelve hundred dollars a year
you were saving nine hundred dollars?
If you consistently miss investments over the years you may wind up with more than nine thousand dollars less.
Avoid missing a beat by saving automatically.
You'll be regularly adding to your account without even thinking about it.
Three: focus on the long term.
One of the best ways to achieve your goal is to see the big picture.
Of course it's a good idea to take a look at where your college savings are invested once a year
to make sure they reflect the amount of risk you're comfortable with
and your child's age. If you need help,
we've got lots of tools to help you with your strategy.
When markets are volatile
it's easy to get caught up.
For example, if you invest in stocks you can expect some downturns.
Don't panic or get market jitters.
If you rashly swap investments during a downswing
not only could you lose any money gained
but you could lose out on the potential upswing.
In the long term that setback is just a blip on the radar
It's important not to let your emotions take hold your investment strategy.
That strategy is unique to your situation.
Having a plan and sticking with it could keep you from making costly mistakes
based on short term events.
And that about wraps up our three tips for making the most of your 529 savings.
Remember, to help increase your chance of reaching your college savings goals
One: start early;
Two: invest regularly;
and three: focus on the long term.
Investment returns are not guaranteed and you could lose money by investing in the Plan.