Helping your Grandkids pay for College? Save!
It is widely understood just how expensive it can be to get a college education these days. In the past, baby-boomers were able to obtain a high quality education for as little as a few thousand dollars. Unfortunately, due to inflation and the rising cost of education, a college student today will likely pay tens of thousands of dollars, if not more.
The rising cost of education makes it much harder for a prospective student to find their path through life. Without adequate savings and preparation for college, your grandkids may be left to struggle financially after graduation—even if they find a good job. To help protect the future of your beloved grandkids, consider the following savings considerations.
529 Investment Plans
A 529 plan is a very advantageous investment vehicle that allows you to build funding and gain interest over time to help pay for your grandkids' higher education. If you invest early enough, your investment can accrue interest and grow over the course of many years to help pay for college education. It is much smarter to make your money work for you in a 529 investment plan as opposed to trading your time for money.
529's and Financial Aid Eligibility
A lot of people considering investments for their grandchildren's education have the same question: will my investment inhibit my grandkids' ability to qualify for financial aid? The answer, unfortunately, isn't black and white. From a needs-based perspective, no, it will not inhibit your loved one's ability to qualify for financial aid.
However, once your grandchild actually starts using the finances, it could affect other forms of financial aid. One technique many people use to ensure that their grandchildren aren't barred from financial aid is to apply their investment financing in their grandchild's final year of college – so they wouldn't need to apply for financial aid in their last few semesters.
Additionally, people always want to know what happens to their 529 plan if they become incapacitated. Will it simply dissolve? Will the government gobble up your investment? Fortunately, your investment won't disappear if you become incapacitated—ensuring that your grandchild is well-cared for. There are safeguards—such as naming a successor—that will help your investment be transferred to another family member.
You must know, however, that if you fail to name a successor, your investment will likely fall under your state's probate law. It is very inadvisable to allow the state to divvy up your possessions, though. It's very important that you do your due diligence to name a successor to secure the future of your investment.
Another concern many people have is reclaiming their investment if they encounter unforeseen emergencies, such as medical bills. Don't worry, you will be able to reclaim your investment, but there will be a penalty. You will have to pay taxes as well as pay 10% of the accrued earnings.
With the cost of higher education rising year by year, everyone needs to better plan and save for the future. If you are looking for an investment vehicle to assist your grandchildren pay for college, consider looking into a 529 plan!