Several months ago, I wrote briefly about
upromise accounts, but I think I should explain further.
upromise is a website where you can register your CVS card and your grocery store card (Meijer for me), and if you buy certain products, they will contribute money into your child's 529 plan. This is a great way to fund your child's education with items you were going to purchase anyway!!
A 529 plan is a tax-advantaged savings plan for college. 529 plans are run by the state where you live, and there are two kinds:
pre-paid tuition and
college savings.
In a
prepaid tuition plan, you pay for all or a part of your child's college costs at today's prices. This saves you the headache of wondering how much college will cost, and sparing you from the major tuition increases we've seen lately.
In a
college savings plan, you put your money into investments and the money grows tax-free. I strongly recommend this plan for two reasons: on average, the stock market has grown faster than college costs (I know it's difficult to believe today!), and second, some states have had to reneg on their promise of the prepaid tuition costs because of skyrocketing tuition and the collapsed stock market.
No matter which plan you choose, all the money growth in your 529 is tax-free so long as you use the funds for qualified higher education tuition and fees, room and board, textbooks, or computers used for education. And while your contributions are not deductible for federal income tax purposes, most states allow you to deduct your contributions.
This is why
upromise is a great way to fund your child's education for things you would have bought anyway! For me, I've only been able to fund about $20 over the past six months. I know others fund well over $100 a month! But if you're going to buy the items anyway, why not fund your child's education at the same time?
