I Just Opened A College Savings Account For My Daughter, And This Is Everything I Learned In The Process (2024)

If you're saddled with student loans and credit card debt right out of the gate, it completely changes the way you enter the job market — you're desperate for a job (oftenany job) so you won't fall behind on monthly payments.

And even several years down the road, it can be harder to leave a job or change careers because the riskis so much more daunting when you have monthly payments to make.

I seriously doubt I'll be able to shell out a fat tuition check when the time comes (and really, how much is college going to cost in 18 years??), so I knew I needed to start saving early and trust that my investment would grow with time.

PS: According to data from theEducation Data Initiative, a four-year undergraduate degree (including books, supplies, and living expenses) costs $35,551per year on average, or $142,204 in total. And that's for today.

According to theSecurities and Exchange Commission, all 50 states have at least one type of 529 plan. Forbes Advisor recently rated the 529 plans that people in any state can access.

I opened my 529 with CollegeInvest, a Colorado-specific plan. You don't have to live in Coloradoto open an account with CollegeInvest, but if you are a Colorado resident, you can get a hefty tax deduction.

Forthe 2022 tax year, that tax deduction is $20,000 for single filers and $30,000 for joint filers.

For me, this was a big one. Who am I to say that my daughter has to attend college in Colorado? Luckily, the money you put in a CollegeInvest 529 plan can be used for qualified higher education expenses at public and private colleges, universities, trade schools, vocational schools, grad programs, postgrad programs, and community colleges all over the world.

Basically, the school just has to participate in a student aid program administered by the US Department of Education — check out this "approved school list."

TheTax Cuts and Jobs Act of 2017 made it so that 529 plans could also be used for K–12 tuition expenses — but let each state determine whether to expand the 529 qualified use.

Colorado chose to keep things as is — so the money I save can only be used for qualified higher education expenses (not a fancy elementary or high school). For me, this wasn't a big deal, but for parents considering private school, it could be.

According to CollegeInvest's website, "Maintenance fees for our plans range from 0-4% annually, but the vast majority of accounts average less than 1% each year."

The administrative fees for the plan I signed up for — a "Direct Portfolio" plan — are currently 0.29%.

If I get into a tough spot and need the money, I'll be penalized. According to the CollegeInvest website, if you make a "nonqualified withdrawal," the earnings portion of your account is subject to both federal and state income taxes and a 10% penalty. Plus, and most notably, "any state tax deductions for contributions may be subject to recapture in subsequent years," according to the CollegeInvest FAQ page.

That latter bit is a killer. As you may remember from #3, I'm getting a $30,000 tax deduction for tax year 2022. 😬

You can change the 529 plan beneficiary at any time. So if my daughter decided not to attend any sort of school, I could change the beneficiary to myself, my husband, or someone else in my circle.

According to CollegeInvest, the 529 beneficiary "can be your son or daughter, a grandchild, stepchild, a favorite niece or nephew, or even yourself! The technical list is very broad."