A 529 college savings account isn't the most exciting gift under the tree, but it is the most practical.
But one gift to his 13-year-old, Jaiden, will require a special touch.
Jaiden dreams of attending Duke University, but the prestigious Durham, N.C. school currently costs over $78,600 a year for tuition, room and board. That sum will likely exceed what’s in Jaiden’s account, but the 529 money will help, and he could possibly receive financial aid as well. Columbia didn’t extend a scholarship and NYU offered some aid but not enough to cover the full cost, Lopez said. He opted for Lehman College, part of the City University of New York, where he got a full ride.
Families had a record $352.4 billion dollars in 529 accounts as of June, up 7% on the year, the organization said. And the average 529 account balance was $25,128 in June, according to the College Savings Plans Network, an umbrella group for the 529 plans across the country. But just 29% of parents saving for college use 529 accounts, according to a 2018 survey carried out by Sallie Mae .
Beyond all the incentives, the account’s most powerful allure is its gift of compound interest. For example, if a family starts with a $100 investment and contributes $100 every month for 18 years, the end sum would be a $34,000 return on a $21,700 investment — using a 5% performance rate.Before asking relatives to contribute to a 529 plan as a gift, parents should carefully consider family dynamics and relationships, says Diane Gottsman, author of “Modern Etiquette for a Better Life.
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