Back-to-school can mean drop-off at daycare, a first big yellow bus ride, a shiny set of tools, move-in day in a dorm, and so many other things. As students of all ages head to school this September, National College Savings Month reminds families about the importance of focusing on future education, too.
The years fly by. By preparing now for future educational opportunities for your student, you’ll be better able to make sure the savings will be there for them whenever they need it.
Here are four reasons to get started now for education costs:
1. Vermont has a plan to make it easy … with a Vermont tax credit to help you save more
Named after Section 529 of the Internal Revenue Code, 529 plans are designed to help families of all income levels set aside funds for higher education. Most 529 plans are operated by state agencies, like VSAC. Vermont’s savings plan benefits family members of all ages, from babies to college and grad students as well as adults returning to training.
Called VT529, the plan was created by the Vermont Legislature to help families like yours prepare for college or training expenses… with tax-free advantages that help those savings go farther.
VT529 is Vermont’s official 529 savings program, and it’s the only 529 plan that gives Vermont taxpayers a 10% state income tax credit on annual savings deposits. Married couples filing jointly can claim a state tax credit of 10% of the first $5,000 contributed to a VT529 account each year–for a total Vermont tax credit of up to $500 for each beneficiary. That means if you are married and have two children, for example, and deposit $5,000 in each of their accounts, you get a $1,000 Vermont tax credit for that year. You can make contributions and qualify for the Vermont tax credit every year. (Single taxpayers can claim up to $250 per beneficiary per year.)
2. VT529 savings help your kids prepare for, and choose, the jobs of the future
Planning now for education after high school can mean greater opportunities for the future—a choice of more jobs at better earnings.
Nearly all of Vermont’s most in-demand and highest-paying careers require some form of education or training after high school. With a 529 plan, you get to choose what that future education looks like: VT529 funds can help pay for tuition, computers, room and board or off-campus housing, travel, fees, and the costs for qualified apprenticeship programs or retraining at institutions throughout the U.S. (as well as at schools in Canada and around the world). You can even use the funds to pay back student loans. And there is no age or time limit on when your savings are used.
3. Starting small now can add up over time
What if you can’t save a lot right now? If like many Vermonters you’re focused on meeting today’s financial needs, you may feel that there’s little extra for saving. But you may be surprised what a difference saving even small amounts can make over time. You can open an account with just $25 (or $15 with payroll deduction).
But it’s never too late to start saving, even if your child is in high school, college or graduate school. Relatives and friends can also help fund a child’s VT529 account through birthday, holiday and graduation gifts. Loved ones can contribute online through e-gifting, and you can also purchase “Gift of College” gift cards, which are available in $50 increments at all Vermont locations of Kinney Drugs and Cumberland Farms stores.
The important thing is to begin saving now, with whatever you can afford.
4. You’ll be ready for their schooling, for whenever they will need it
National College Savings Month is a great time to learn about the benefits of 529 plans and start preparing for your loved ones’ education. Find out more about Vermont’s 529 plan at vsac.org/save. Any family who has questions or would like help in setting up an online account can email VHEIPquestions@vheip.org.
And when it comes time to use the funds for education past high school, the VT529 plan now offers a prepaid Mastercard option to pay for eligible education expenses. The VT529 Prepaid Card can be used at any institution or merchant that accepts Mastercard, including online retailers, making it easier than ever to spend and track your 529 funds for college tuition or qualified apprenticeship, technical and vocational education expenses, room and board costs, and more. Learn more about the benefits of the 529 prepaid card and the many ways 529 funds can be used.
Need help with education goals or financing? VSAC is here to assist you. You can contact us at 800-642-3177, 8 a.m. to 4:30 p.m., Monday through Friday, and by email at info@vsac.org.
Read the story on VTDigger here: Four reasons to make saving for college or training part of your back-to-school routine.