Saving For College: 529 Savings Account vs. Tax-Advantaged Investment Account

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If you want to start saving for your kids’ college education, options are available, like a traditional 529 savings accounts or UNest tax-advantaged investment account that gives you more flexibility on what to use the funds. 

When you’re a parent, you want to provide your children with the best opportunities possible. For some kids, this includes a college education, while others dream of starting their own businesses. Planning for your child’s future includes finding the right savings plan for you and your family. 

It’s always a good idea to explore your options and learn more about the plans available. You need to know the details of each plan before making an informed decision as what works for one family isn’t always the best option for the next. Exploring different saving plans will help you determine the best way to save your children’s futures.

529 Savings Account

Named for the Section 529 of the Internal Revenue Code (IRC), the 529 savings plan is a way for parents to save for college in a particular state. This plan can be used to pay for college, partial tuition for children still in K-12, and computers. However, these plans are run by each state, and not all states offer them. It’s also possible to use these funds to pay off student loan debt and the costs of an apprenticeship. 

With a 529 savings account, there isn’t a maximum amount of money that you can save per month or year. However, only $10,000 a year can be applied towards private school tuition for children K-12. It’s easy to establish a 529 savings account online or through your financial advisor. However, you need to check the rules specific to your state. 

How a 529 Savings Account Works

By placing money into a 529 savings account, you don’t pay taxes on the income you used to fund it. As long as the funds are used for education, you won’t need to pay federal taxes on the money when you take it out to pay for college or tuition. You can open an account for your children or your grandchildren. 

You might, however, need to pay state taxes on the funds even when you’re using them for education. It’s always a good idea to ask an expert in your state before opening this account. 

There aren’t limitations on the amount of money you can invest each year, but there are some disadvantages to choosing a traditional 529 savings account. Here are some things to consider:

Restrictions and Disadvantages of 529 Savings Accounts

Like any other savings plan, there are always restrictions and disadvantages you need to consider before moving forward. Here are a few of the disadvantages:

  • It is not available in all states.
  • The rules and restrictions may vary by state. 
  • It can only be used for educational expenses and amount changes based on college and K-12. 
  • You lose your tax benefits if you opt to use the funds for anything other than education or repayment of student loans. 
  • It limits your investment options. 
  • Excessive fees eat into the savings.
  • The person who owns the account can change the beneficiary at any time. 

While there are some significant advantages to selecting a 529 savings account, these restrictions and disadvantages need to be considered. 

UNest Tax-Advantaged Investment Account

UNest is an investment app that you use on your phone. In just a few minutes, you can open an investment account for one of your children or an entire houseful of kids. Once the account is open, you can invite your friends and family to help you save, and in some cases, get rewarded with additional funds in your account by shopping online at places you already buy from on a daily, weekly, or monthly basis. 

UNest offers you a variety of investment options, and you can make changes to the type of investment from your phone. The app can even recommend investments for you based on your goals, and there are tax-saving options for you when using the tax-advantaged investment account of UNest.

The funds that you save in the account can be used to pay for your kids’ college. However, you have the flexibility to also use the funds for whatever your children want in the future, like a house, to pay for a wedding or a big trip. 

The Tax-Advantaged Investment Account For Kids

With a minimum $25 deposit, you can open an account no matter how small, or large your saving goals are. There are two types of accounts available through UNest:

  1. Regular account: This is an account for a single child. If you have an only child or only one young enough for college savings, this account might be the one for you. It’s also a possibility to open more than one regular account for each of your children. 
  2. Family account: With a family account, you can create investment accounts for up to five children. The family plan can make recommendations for each of your children based on their age for investing. You only pay one fee instead of five separate ones. 

The Benefits of UNest Investment Account

No matter which type of account you select, there are some benefits you’ll enjoy to maximize your saving power and to help your child in the future. These benefits include:

  • No affiliation to home state or its plans,
  • No penalties for withdrawal for other purposes.
  • Different plans to better accommodate your unique situation.
  • Investment recommendations based on each kid’s age.
  • Cashback with certain vendors into your investment account.
  • Allows family and friends to add to your account. 
  • Low monthly fees.
  • Use the money for things other than education.
  • Arrange for automatic fund deposits. 
  • Change your investments any time of the day or night.
  • Works on your mobile phone.

When you invest with UNest, you get the flexibility you don’t find with a traditional 529 savings account. Plus, you have the convenience of accessing your account and making investment choices from your phone. This can open up more options for you and your family to help your children succeed in life. 

There may be times when you want to invest more and others when you need to pause your savings and investing. When you can’t afford to save, the cashback program with UNest makes it easier to add funds without tapping into your own cash. 

Invest and Help Your Children Achieve Future Goals 

While your plans might include your child going off to college someday, they might have different plans as they grow older. With UNest, you can invest in your children’s future without pinning them down to one future goal. The UNest plans help you save money and invest it, so your children can use it for any financial purposes they have in the future, like going to college, purchasing a car, or starting a business. 

If you are looking for flexibility in saving for your children’s future goals, open an account with UNest.

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