Happy 5/29! Why it's a good day to set up a 529 college savings plan

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The cost of college keeps going up – and so does the need for higher education.

May 29 – 5/29 (get it?) is known as 529 Day, proclaimed by the financial services industry to nudge families into taking the step to prepare for college expenses.

Forbes magazine calls it the third most popular May holiday, after Memorial Day and Cinco de Mayo.

If your eyes glaze over at the discussion of such things, Forbes offers a simple description of the plans, noting that "...a 529 is an investment savings vehicle that allows earnings to grow tax-free and ensures the money will not be taxed when used to pay for college."

The story includes a bit of financial advice that may stop parents from procrastinating, noting that delaying contributing to a 529 plan will cost you; it cites a general rule of thumb that says that every dollar borrowed will cost you $2 by the time you pay the debt, so money saved in advance can dramatically lower the lifelong cost of a college education. 

The Huffington Post reports that there are 5/29 efforts underway across the nation aimed at demonstrating how easy it is to set up an account, which can often be started with $25.

The Washington Post's personal finance columnist clears up some common misconceptions about the plans, noting that money invested in these college savings accounts can be used for qualified expenses at any public or private institution, regardless of where you set up the account or where the beneficiary attends school.

A total of 33 states sponsor plans, but families can invest in any state’s plan, regardless of where they or the beneficiary lives.

The Minnesota College Saving Plan is administered by the Minnesota Office of Higher Education. The website CollegeSavings.org compares the state plans.

The investment firm Edward Jones has surveyed Americans over the past four years to determine their awareness of 529 accounts. This year, it found that 66 percent of respondents do not know what a 529 plan is – a number that has not budged much over the life of the survey.

Money saved in a 529 plan has no impact on student aid eligibility. If your child decides not to attend college or vocational school, you can transfer unused funds to another family member, tax and penalty-free.

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