A 529 plan is a great way for a family to save for educational purposes. Yet a recent study found that just 30 percent of American households with children under 18 years old understand these savings vehicles. Here are some common myths about 529 plans that will help you better understand them.
Myth 1: 529 Plans are Only for Kids
The earlier you start stashing money in a 529 plan, the better. However, that doesn’t mean these savings accounts are just for kids. In fact, an individual can open a 529 plan in their own name and name themselves as a beneficiary. An adult can also use a 529 plan to pay off student loan debt.
Myth 2: There are Contribution Requirements
One of the best parts about a 529 plan is saving as your wallet allows; there are no contribution requirements attached. You can save as little as you want. You could even open a 529 plan and never contribute to it again. Not that we’d suggest that.
Myth 3: It’s Best to Have a Plan in a Child’s Name
While anyone can open a 529 plan in your child’s name, it might be a better idea for you to keep ownership of it. That’s because when it comes to determining financial aid, a 529 plan will be counted as an asset for your child. If your child does not need the 529 plan, you can always change ownership of the account. As US News notes, the more assets your child has could mean less loan money coming their way.
Myth 4: It is Location-Based
A 529 plan is not tied to the state in which you live. You can open a plan in any state, and the funds can be used in any participating school across the nation.