No tricks, just treats: Saving for college doesn’t have to be scary
Key takeaways
Scary thought: I can't afford to save for college
Reality check: Small contributions add up over time, and starting early can make a huge difference.
Scary thought: Saving will hurt my child's chances for financial aid
Reality check: A 529 plan’s impact on financial aid is typically minimal, and the advantages often outweigh any drawbacks.
Scary thought: My child might not go to college
Reality check: A 529 plan is flexible and can be used for a variety of educational expenses—or even transferred to another beneficiary.
As Halloween approaches, parents’ thoughts turn to haunted houses, spooky costumes, and eerie stories. But there’s one thing that shouldn’t send shivers down your spine—saving for your child’s future with a CollegeBound 529 college savings plan.
While it’s natural to worry about things like affordability, financial aid, or your child’s future plans, don’t let those concerns prevent you from taking action. Let’s shine some light on some of these common fears and uncover why a CollegeBound 529 plan could be a valuable tool.
What’s scaring you: I can't afford to save for college
Not so scary: Every little bit helps
Saving for college can feel overwhelming, especially when juggling the costs of daily life. But the truth is, even small, consistent savings can have a big impact over time. Thanks to the power of compound growth, setting aside as little as $50 per month can turn into more than $19,000 by the time your child turns 181. Imagine how much less stress that would bring when it comes to paying tuition! Every dollar saved now is a dollar (plus interest) you might not have to borrow later.
What’s scaring you: A 529 plan will reduce my child's chances of getting financial aid
Not so scary: It doesn’t have as much impact as you think
There’s a lot of confusion about how savings affect financial aid, but here’s some good news: 529 plans generally have a very limited impact. When it comes to financial aid calculations, parental assets in a 529 plan are only counted at a rate of up to 5.64% under the federal formula for the Free Application for Federal Student Aid (FAFSA). So, for every $10,000 in a 529 plan, a financial aid office would only include $564 (at most) in the current school year asset calculation.
The potential benefits of saving—like reducing future debt—are likely to far outweigh any modest impact on aid. And speaking of aid, keep in mind that only a small percentage of students receive full scholarships. Only 7% of students are awarded significant scholarships. On average, first-time undergraduates who receive government grants and scholarships at a 4-year college receive about $14,890 annually2.
What’s scaring you: What if my child doesn’t go to college?
Not so scary: There are still plenty of options
The future can be unpredictable, and it’s possible your child may choose a different path. Fortunately, a 529 plan offers flexibility. The funds can be used for a wide range of education-related expenses beyond traditional four-year colleges, such as vocational schools, trade programs, or even K-12 tuition. If your child ultimately decides not to pursue higher education at all, you can transfer the account to another family member—so that money you’ve saved will not go to waste. Additionally, 15 years after the 529 account has been opened, 529 funds can be rolled over into a beneficiary-owned Roth IRA tax-free and penalty-fee, subject to Roth IRA annual contribution limits.3
Don’t let the myths about saving for college haunt you. With the flexibility and features of a CollegeBound 529 plan, you can help set your child on the path to future success—without the fear.
Calculate how much you should save using our college savings tool.
Footnotes
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1
Hypothetical illustration doesn’t represent the performance of any specific investment. Assumes 5% growth on account balances every year over 5, 10, and 18 years. Compounded growth is defined as multiplying the account balance of any given year by 1.05 to show growth. There’s no compounded growth in the first year of contributions.
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3
To be eligible for a 529 Roth rollover, the 529 account must be open and in the beneficiary's name for at least 15 years; the eligible rollover amount (up to $35,000 in unused funds) must have been in the 529 account for at least five years; and the beneficiary must have earned income that equals the amount to be rolled over.
