NORFOLK-Stephanie Stockdale says every dollar counts when it comes to saving money for her daughter Sidney's college education. Sidney is a seventh grader and the beneficiary of a 529 college savings plan her mom opened.
According to the college cost calculator on Savingforcollege.com, in six years, when Sidney goes to a college, the four-year education that costs $100,000 now will cost $155,000.
"As a single parent, I'm looking for every strategy I have to save money," says Stockdale.
She recently won a $100 raffle from Access College Foundation, based in Norfolk. The foundation works to give high school and middle school students the tools they need to attend college, both financially and educationally.
Access partners with Virginia 529 and holds several raffles a year. CEO Bonnie Sutton says the partnership helps many parents think about saving before high school graduation day.
"Unfortunately for our families, they either don't have the discretionary fund to start the savings or they don't feel like they have the discretionary funds. We're saying even if you can only save $5 a month then that will help," says Sutton.
Access also gives $25 coupons, the cost to set up a 529 Invest plan.
Virginia Beach-based Ameriprise Financial adviser Keith Berenguer says the more colleges hike tuition, the more parents are flocking to the 529.
"To my mind, it makes sense to do as much as possible to have a sum of money there because you just don't know how much it's going cost 10 to 15 years from now," he said.
The biggest advantage is the money grows tax free. Berenguer finds that the College America plan is the most popular of the four types offered in Virginia. With that one, the account is opened through the help of a financial ad visor. The holder invests in a variety of funds that have varying risks.
Other Virginia 529 plans are the Prepaid, in which families pre-pay future tuition only and the Invest plan, which allows customers to choose a portfolio of mutual funds that suits their risk tolerance.
'You run that by yourself and it's age-based portfolio," explains Berenguer.
And finally, there's the College Wealth plan, which is FDIC insured and geared towards more conservative investors.
While Berenguer believes the 529 is the best college saving tool, he points out some disadvantages.
"If they don't go to college, the money will come out and will be taxed as ordinary income and will be subject to a ten percent penalty," he explained.
The account holder can change the beneficiary as long as it's a family member.
Berenguer says if parents are looking to give their children some money for living expenses, they should consider a custodial account. A 529 won't help with that.
Also, parents who are hoping for financial aid need to know that having a 529 could lower how much need-based aid they would qualify for. A 529 has to be listed as an asset on the federal aid form, called a FAFSA.
Still, Stockdale says it's an asset she'd rather have and recommends other parents follow suit.
Next week, May 29, is 529 College Savings Day nationwide. Virginia529 will partner with select hospitals across the state to award several $529 Virginia529 accounts.
An account will be awarded to each mother and her infant born closest to 5:29 p.m. on May 29th.