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Saving for college in uncertain times

Parents can open Delaware 529 account with just $25
June 9, 2020

Many families have been hit hard by the financial impact of COVID-19, but they can still sock away college savings for their children without breaking the budget, State Treasurer Colleen Davis said.

“Delaware 529 is a really advantageous plan that has been in place since 1998,” Davis said. “It’s one of the first to be established. We have very low rates and get people the biggest bang for the buck and make their dollars grow.” 

As money grows, any interest earned is tax-free as long as funds are put toward education, Davis said. With costs rising in colleges, apprenticeships and trade schools, some parents can expect to pay up to six figures for their child’s education, Davis said.

“The importance of saving is always there,” Davis said. “Education opens possibilities for the next generation to be more financially stable.”

The impact of future debt on the next generation is reduced when young people don’t have big student-loan debts, Davis said, making it much easier for them to attain milestones such as home ownership.

If a student earns a scholarship, saved funds can be transitioned to a younger sibling or other family member, Davis said, or for continuing professional development or certification. Funds also can be cashed out, but will be taxed if not used for education, she said.

Parents can open an account at 529.delaware.gov with $25 and the child’s personal details. Automatic contributions to the account can be set up, as well as a link to the account so family and friends can contribute on birthdays or other special occasions.

“It’s never too late to save for your kids’ future,” Davis said.

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