If you anticipate paying for a student's college expenses, your money saved is their education earned. And there are several ways to plan for the goal of helping them achieve that education.
529 College Savings Plans
Each state provides at least one choice of 529 college savings plan. This type of savings plan is operated by a state or educational institution to help families prepare for college expenses. A 529 may also offer significant tax breaks to help encourage saving for education. There are two basic types of 529 plans:
- Savings plans, which work much like a 401K or IRA by investing your contributions in mutual funds or similar investments. Keep in mind that 529 college plans are not FDIC-insured, not bank guaranteed, not a deposit, not insured by any federal government and may lose value.
- Prepaid plans, which let you pre-pay all or part of the costs of an in-state public college education.
Depending on your family's needs, you might look into a 529 plan to get college savings started.
Beyond the 529 College Savings Plan
529 plans do come with some restrictions. For example, there may be limits to the contributions permitted for each account. The actual dollar limits vary by state. To supplement a 529 college savings plan, consider other savings products that can offer competitive rates of return—like Ally Bank Certificates of Deposit (CD) or Money Market Accounts. Our CD rates are consistently among the most competitive available in the country, based on rates published by Bankrate.com. Your deposits in Ally Bank CDs are also FDIC-insured to the maximum allowable by law. There’s no minimum opening deposit, and we compound interest daily to help maximize your return. A good CD can be a powerful way to supplement college savings strategies, whether you have a 529 college savings plan or not.
With the goal of a college education ahead, any step you can take to save more is a good one. Learn more about how Ally Bank can help. Visit AllyBank.com or call live, 24/7 customer care at 877-247-ALLY (2559) today.