Author: Deborah Goodkin, Managing Director, Savings Plans, First National Bank of Omaha
As the costs of higher education continue to rise, it is increasingly necessary for individuals and families to be aware of the various options available to finance educational expenses like tuition, room and board, books, supplies and more. Those looking to pursue higher education have a wealth of choices when it comes to covering costs, with 529 plans being a particularly useful and simple savings method for many due to their flexible contribution setup, tax advantages and ease of use.
Yet, in a recent national survey released by NEST 529 College Savings Plan, 57 percent of respondents revealed that they are either unfamiliar with or do not know what a 529 college savings plan is.
To help individuals and families make informed financial decisions and better understand 529 plans and the options available to fund higher education, we are addressing the common misperceptions surrounding college savings.
“Loans are my only option."
According to the NEST 529 survey, 54 percent of respondents report that it is very likely or somewhat likely they or their child will have to take out student loans to pay for higher education.
While loans may be an appropriate choice for some, diversifying your financial strategy through the use of 529 plans, grants and scholarships is a smart way to mitigate over-reliance on loans as well as lower the potential of accumulating post-graduate debt—a reality that 39 percent of survey respondents are facing.
A simple way to start diversifying your payment plan for higher education is to consider saving in a NEST 529 account. With NEST 529, your money works for you. Earnings on your investment grow federally and state tax-deferred, meaning that the money you are earning on your investment is being reinvested for maximum growth opportunity.
With numerous other benefits ranging from scholarship opportunities to automatic plan contributions, NEST 529 helps you approach the expenses of higher education with confidence and preparedness, making it a great way to help fund educational aspirations, without relying on loan approval and the potentiality of future debt.
“My child and I are the only ones who should fund higher education.”
Though roughly 50 percent of survey respondents believe that the child and the parent should be responsible for paying for higher education, covering the costs does not have to be an isolating journey.
With a NEST 529 account, it’s easy for you to invite friends and family members to join in. Loved ones can help boost your savings efforts by sending gift certificate contributions or using the free online gifting service, Ugift. Both options are user-friendly and do not require added fees.
When saving for higher education, it’s also helpful to keep in mind that step parents, grandparents and step grandparents may open NEST 529 accounts for their step child or grandchild. The same child can be the beneficiary of multiple, separate accounts, and account beneficiaries can be changed at any time.
“I have other financial obligations to prioritize ahead of saving for college.”
According to survey results, nearly 77 percent of respondents have never contributed to a 529 plan, with many citing that they are currently too preoccupied with other financial obligations, including paying off current debt (16 percent) and high costs of living (13 percent). Further, 51 percent of respondents note that it is difficult to balance saving for retirement while contributing to a higher education savings plan.
Having financial priorities is a healthy way to approach your finances, but establishing a budget surrounding savings will prove useful in the long run and allow you to allocate your money and meet savings goals in various categories—from funding higher education to retirement and beyond. Every cent counts when it comes to saving and what you may consider to be a small percentage of your income can make a difference in the long term.
To help you get started and map out your budget, check out the NEST 529 College Savings Calculator, which creates a personalized savings report unique to your needs. If you have yet to open a NEST 529 account, know that there is no minimum needed to open one or to continue to save. When it comes time to save, you can choose to deposit in lump sums, set up an Automatic Investment Plan, or both—whatever works best for your individual circumstances. You can also set up payroll direct deposit by way of NEST@Work, a boon to both you and your employer. Refer your employer to the Employer tab on NEST529Direct.com to learn more, and read up on your other contribution options here.
Saving for higher education is an investment in the future, and by dispelling these common college savings misperceptions, you’re one step closer to a positive savings experience. If you have any questions for the NEST 529 team, please contact us at firstname.lastname@example.org or 1-888-993-3746.