FreshmanFund.com puts a new spin on saving for college. The site lets you set up a “529 gift registry” that anyone an contribute to. Instead of having Grandma right a check to Junior for his birthday, they can send that money directly into FreshmanFund.com.
The idea, as described at FreshmanFund:
It all started at a birthday party for a 4-year-old niece. As she tore through a stack of expensive, thoughtful presents and tossed them aside to be quickly forgotten, we couldn’t help but think how much we would have preferred to contribute the cost of the present to a college fund instead. Thus The Freshman Fund was born.
Freshman Fund is an easy way for parents, relatives and friends to contribute gift money to college savings. Birthdays, holidays and other events could be opportunities for a more meaningful, practical gift. A dollar saved today in a tax-free 529 plan could grow exponentially by the time the child is ready for college.
Saving for college is one of the most important things a parent can do for a child. As every parent knows, the sooner you start saving, the easier it is. Any amount of saving started today is that much less saving needed in the future. The Freshman Fund is here to help you get started. We look forward to making your job easier.
I like the idea. You should also consider setting up an account with Upromise — see our review.
Motley Fool writer Rich Duprey suggests an alternative to spending your “tax rebate” check from the government. Duprey points out that your $1200 can turn into $6,600 by the time your kid goes to college:
Put your kids through college
The way tuition costs have risen lately, you’re probably not going to be able to turn that $1,200 into enough to put Johnny through four years of higher education. The College Board says that the average cost of a private, four-year college is $23,712, up 6.3% from last year, while public colleges cost on average $6,185 a year. And that’s just for tuition and fees. Still, $1,200 invested in a 529 plan for 18 years at 7% interest is more than $4,000, while at 10%, you’ll get more than $6,600.
And that doesn’t even consider the tax benefits of the investment.
Alabama Governor Bob Riley and State Treasurer Kay Ivey joined for a ceremonial signing of a new state bill that gives parents a tax break for contributing to a 529 college savings plan.
Already, Alabama residents who contribute to a 529 plan in its state don’t pay income taxes on the investment returns. But the new law also allows them to deduct up to $5,000 per year from their state income taxes for their contributions. That’s like getting $250 free from the state.
Read about Alabama 529 plans.
Washington D.C. is making contributing to a 529 college savings plan even a smarter idea. The D.C. city council has voted to increase the tax deduction limit to $4,000 per person. That means that people who contribute to a 529 plan can deduct up to $4,000 of their annual contribution from their Washington D.C. income taxes.
Of course, everyone still gets the federal income tax break. This break lets you withdraw money for qualified education expenses without paying taxes on the investment earnings.
We have updated our Washington D.C. 529 profile to reflect the new tax deduction.
The state of New York is making it easier to contribute to 529 savings plans. In the past, only the account holder of the 529 could contribute funds to a plan. (That’s typically a parent). Now other people, including relatives, employers, and friends, can contribute to the same 529 plan.
This is a great move. Only allowing parents to contribute was overly restrictive. But now New York has friendlier laws than a lot of states. I especially like how employers can contribute to a 529 college savings plan. Perhaps they could match their employees contributions like they do with 401(k)s?
Here’s more information about New York 529 plans.