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[Video] Investing in a 529 College Savings Plan

[Video] Investing in a 529 College Savings Plan

MICHELLE SMALENBERGER & ROBERT STOLL, CFP & CFA ®
[Length: 3 Minute Video]

We’ve been talking the last few weeks about saving for your child’s education or filing for student aid. If that’s a part of paying for your child’s college, consider the 529 college savings plan.

Michelle: So today we are going to talk about investing in a 529 college savings plan. There are a couple different terms for this. It could be called your college savings, this could be prepaid tuition. There are a lot of synonyms this could relate to. 

Today, Rob is going to talk about a 529 college savings plan and investing in that for our students. So Rob, tell us about a 529 college savings account. 

Robert: So a 529 college savings account is exactly what it sounds like. It is a special account set up by the government to allow parents and grand parents to save up for college.

The cool thing about a 529 account is that as you invest it in, that money grows and it grows tax free. And then when you go to use it for college you can use it out without any taxes being taken out.

Michelle: So as it grows, it grows tax free. That is great news! What are some things we should know about a 529 college savings plan?

Robert: You may be surprised, but the thing about investing in a 529 college savings plan is you don’t want to be investing in it too aggressively.

Don’t Invest Too Aggressively In A 529 College Savings Plan!

We all know that as your child ages, life is busy and you can loose track of what you are investing in. As your kids get into middle school and high school make sure you aren’t invested too aggressively.

The last thing you want, if the market takes a turn is to fall backwards right before your student needs the funds. So make sure you are considerings how much you are investing at that time. 

Michelle: This is interesting because for your 529 depending on your state, you can choose a specific fund or maybe a target date allocation. Would that help target the date and adjusting for risk?

529 College Savings Plan: Stock VS Bond Investment

Robert: When you open a 529 account, there are a variety of stock and bond funds to invest in. You can choose to invest and manage it yourself as they get older or you can choose to be a little more hands off.

If you choose to be a bit more hands off, you can investing an H-based fund. That fund will adjust your investments for you. While your student is young, it will invest in stocks for more growth.

When in high school, the fund will trim back your exposure in stocks and put it into bonds for more steady and conservative growth. You want to make sure the money is preserved right up to the point when your student needs it for college.

Michelle: Those are some of the ways we can actually invest in a 529 college savings plan. This is really helpful knowing that 529 accounts can help protect your investment.

If you don’t know how to get started, fill out an account, put money in – we are here to help you get started! Schedule a call with Financial Design Studio to discuss this and your portfolio today.

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