It’s no secret to many of you that the cost of higher education continues to rise at an alarming rate. But one of the best ways to set your child up for success is to ensure they can attend the college or university of their choice.
Instead of just stashing away a few bucks in a traditional savings account, there are more efficient ways to make the most of saving for college. Enter CollegeBacker.
CollegeBacker offers families, from any financial background, the ability to open a tax-advantaged investment account to enhance their ability to save for a child’s’ future education.
What is CollegeBacker?
CollegeBacker is making it easier for families to set up savings accounts designed to pay for college. Its robo-advisor technology makes it easy to invest contributions in a tax-advantaged college savings plan, called a 529. It’s like Personal Capital, only specialized for college savings.
Here’s a quick overview of the benefits of opening a 529 through CollegeBacker:
- Tax-advantaged college savings
- Low fees and no account minimum
- Ability to set up recurring contributions
- Allows others to make contributions – quickly, securely and online
- Easy to use platform with genuinely helpful customer service
We’ll dive into each of these benefits in more detail in this CollegeBacker review, so read on to learn more.
What are the benefits of a 529 college savings account?
Simply put, a 529 college savings account is a special type of investment account. Think of it like a Roth IRA, but instead of retirement, 529 plans are designed for educational savings. The investments in a 529 savings plan grow tax-free and can be withdrawn tax-free when used to pay for educational expenses.
What makes a CollegeBacker 529 Plan Different Than Other College Savings Options?
Most financial advisors recommend 529 plans, like the ones offered through CollegeBacker, for an array of reasons. First of all, one of the benefits of a 529 plan is that there are virtually no eligibility requirements. That means almost any family can reap the benefits of a 529 plan. And with higher education costs continuing to rise, a 529 plan can be invested in the market and experience the potential for more growth than traditional tools like savings bonds.
Who can open a CollegeBacker College Savings Account?
Any US citizen or resident who is at least 18 years old can open a 529 account. You don’t have to be the child’s parent or even part of the child’s family to open an account on their behalf. That makes 529 accounts the perfect way to save for important children in your life – nieces, nephews, grandchildren, godchildren, or foster children.
How much does it cost to use CollegeBacker?
CollegeBacker doesn’t charge fees for managing college savings accounts. When you couple that with the awesome feature that there’s no minimum balance, it’s clear that CollegeBacker is serious about making college saving accessible to everyone.
Using CollegeBacker will give you access to invest college savings into certain mutual funds and other market-driven vehicles. This means you’ll have to pay the funds’ fees, which typically have low expense ratios ranging from 0.17% to 0.2%
What happens to my 529 balance if the child decides not to pursue higher education?
Since a 529 account is in the adults’ name, it’s easy to change the beneficiary child of the account. CollegeBacker will help you change the beneficiary starting with a simple email and a little paperwork. You can even do this after withdrawing part of the account balance, so another child in the family can benefit from using the funds.
Is a CollegeBacker 529 limited to just tuition payments?
No, a 529 plan can be used for other college-related expenses as well. That includes tuition and fees charged by the school, but it also includes books and the cost of living in the dorms. One of the great benefits of a CollegeBacker 529 is that any school eligible for US financial aid will accept money from the plan. That means that your child will have nearly endless options when it comes time to pick a school.
My Favorite Part About CollegeBacker
Now that you’ve seen how beneficial and flexible a 529 plan can be, you’re probably ready to compare different options. There are many different companies offering 529 plans, but in my opinion, the thing that sets CollegeBacker apart is the social aspect.
Similar to a GoFundMe or other type of social contribution platform, CollegeBacker makes it easy for anyone – not just parents – to contribute to a child’s 529 account. With CollegeBacker, your friends and family members can easily make a contribution to an account. This makes CollegeBacker the perfect choice for family members who want to contribute for birthdays, holidays, and special milestones. Anyone can contribute to the account securely and safely online.
Using CollegeBacker in Real Life
The earlier you can start saving for a child’s education, the better. Here’s how to make the most of your CollegeBacker 529 plan:
- Open an account as soon as possible. The earlier contributions are made, the more time they have to grow. Since the account is opened in the parents’ or contributor’s name, there’s no reason to wait to open an account.
- Share your CollegeBacker link for important events. Encourage one-time contributions from friends and family members by sharing the link for your child’s baby shower, birthday parties, bar mitzvahs, and of course, high school graduation.
- Start automatic contributions right off the bat. Even if you can only afford a few bucks a month, savings is all about small progress over time. You can always increase your contributions later on, but starting right away helps build the habit and gets that account growing.
- Involve your child! Once they’re old enough, include your child when you check the account balance or adjust contributions. Encourage your child to make their own contributions to the account as well. This will motivate them to achieve their educational goals and teach them valuable lessons about saving for the future.
- Open a separate 529 plan for each child. While CollegeBacker makes it easy to change the account beneficiary, there are some financial aid and tax specifics that you should also consider. Most families will be better off opening a separate 529 for each child, rather than pooling all the contributions into a single plan. However, if you’re only going to open one account, you’re much better off opening a 529 with CollegeBacker than an alternative type of account like a UTMA.
- Discourage savings bonds. We all know Grandma wants the best for her grandchildren, but one of the benefits of CollegeBacker is that anyone can make a contribution to the 529 plan. Encourage Grandma to give up on outdated savings vehicles like savings bonds or CDs and instead make a contribution to your child’s 529 account, where it will have a greater tax-advantaged potential for growth.
CollegeBacker is for everyone
If you have the desire to save for your child’s future educational expenses, a 529 plan is one of the very best ways to do it. CollegeBacker makes opening, investing, and contributing a breeze, while giving your friends and family the ability to make contributions. And since the beneficiary can be updated easily with a CollegeBacker 529, there’s very little risk involved on the off-chance your child chooses not to pursue higher education.
So what are you waiting for? Open a 529 for the child – or children – in your life today!
