This post is sponsored by the Florida Prepaid College Board, through my role as a Believer Blogger. All thoughts are my own.
It’s going to be a hot one, you guys. 91 degrees today, and we’ve still got a month to go before it’s officially summer. But that’s Florida life for you.
There’s lots to celebrate in May. For a lot of Florida families, it marks the start of summer vacation, along with familiar festivities like Mother’s Day and the long Memorial Day weekend. We also have lots of lesser known holidays, like National Chocolate Chip Day (May 15) and Star Wars Day (May the 4th be with you!). But did you know that May 29 is National 529 College Savings Plan Day?
529 Savings Plan 101
If you’re not familiar with Florida Prepaid 529 Savings Plans, no worries – I’ll touch on the basics for you.
In a nutshell: 529 Plans are specifically designed to save for college expenses. The name “529” comes from Section 529 of the federal tax code, which authorizes states to offer these types of plans. There are two types of 529 Plans – Prepaid and Savings (more on that in a second). Earnings from 529 Plans are tax-free when they are used for qualified higher education expenses. In general, these expenses include tuition, fees, room and board, and the cost of books, supplies and equipment required for the enrollment or attendance at an eligible educational institution (which include undergraduate, graduate, and vocational/technical schools).
So what’s the difference between a Prepaid Plan and a Savings Plan? A Prepaid Plan is essentially a prepackaged college savings plan that covers specified college costs. The savings amount is set for you, and when your student is ready for college, the plan pays for the costs covered by your specific plan. A Savings Plan, on the other hand, allows you to develop your own plan to save for college. You decide how much you want to save and when you want to save. You also get to choose how you want to invest your savings using the investment options offered by the plan. When it comes time for college, you use your savings to pay for actual college costs at that time. Think of it like ordering an entree off the menu (portion size is predetermined and you have a handful of sides to choose from) versus eating from a buffet (lots of choices and portion size is up to you). Both types of meals have pros & cons, and a lot of it comes down to personal preference and what works for your appetite (and budget) at mealtime.
One thing to keep in mind is that the Prepaid Plans offered by the Florida Prepaid College Board are guaranteed by the State of Florida, which means that you can never lose what you’ve paid toward the plan. Conversely, Savings Plans are not guaranteed, so the value of your investment is subject to market fluctuations. But a Florida 529 Savings Plan also allows your investment earnings to grow tax-free. Your contributions will earn interest and won’t be taxed when the money is taken out to pay for college.
A few other things to note:
- There’s no minimum amount to open 529 Savings account. You can contribute as much and as often as you like; or if you prefer, you can set up automatic contributions.
- You can spend the money you save in a 529 on much more than tuition! That’s why these plans work great in conjunction with Prepaid Plans. A 529 can make it easier to save for expenses that don’t fall under the Prepaid Plan, like dormitory fees, books, and computers.
- Other people can contribute to a 529 Plan, and Florida Prepaid makes it easy with gift certificates and a gifting portal.
- You don’t have to wait until the annual Open Enrollment period to open a 529 Plan. Start one any time! It’s easy to open, easy to manage, and easy to save.
National 529 College Savings Plan Day
As I mentioned above, May 29 (5/29) is National 529 College Savings Plan Day. Florida Prepaid is celebrating two ways:
- If you open a Florida 529 Savings Plan from now through May 29, Florida Prepaid will seed your account with $25.
- If you set up an automatic monthly contribution of $25 or more, they will add another $25 into your account.
This is especially good news if you missed Open Enrollment this year! You don’t have to wait a whole year. There is a Florida 529 Savings Plan that you can enroll in today.
To learn more or to enroll, visit www.myfloridaprepaid.com. Have an amazing summer!