Yahoo Finance Take Advantage of College Savings Day to Boost Your Account
If you've been thinking about opening a college savings account -- or if you already have one -- you may be able to win extra money for your 529 plan during the month of May.
That's because May 29 is 529 College Savings Day, a unified push by states to shine more light on the tax-advantaged college savings plans known as 529s, in reference to the IRS tax code where they are outlined.
Throughout the month, savvy -- and lucky -- consumers can benefit from promotions, giveaways and drawings, sometimes with big cash prizes.
"The truth is, if you're somebody who has been thinking about it, I would be using this time to do my research," says Andrea Feirstein, managing director of the college savings industry consultant AKF Consulting Group. "I would not let the month of May, or May 29 in particular, go by without having some sense of what those additional incentives are."
The promotions offer incentives for opening new accounts, but can also benefit current account holders. For instance, Ohio is holding a drawing to win one of 10 $2,500 college savings awards; Virginia is offering $2,500 to the winner of a "turning dreams into reality" testimonial contest; and North Carolina is holding a drawing to win $529 in savings, with account holders getting entries based on how many contributions of $25 or more have been made since Jan. 1.
[Take these four steps before opening a 529 plan.]
Experts say sooner is better when it comes to opening a college savings account, but if someone has been considering it, May is a good time to take advantage of bargains. September is another month when states tend to offer deals, Feirstein says .
Some states, such as Washington, will offer a fee waiver. Others will offer matching contributions to new accounts, such as Utah with a $25 match or California with a $50 match. Nebraska is offering a $100 bonus for the first 200 accounts opened for children age 8 and younger.
The prizes can be significant. Virginia is offering a $10,000 giveaway for a new Virginia529 InVEST account opened between May 1 and May 31.
Betty Lochner, chairwoman of the College Savings Plans Network, a consortium of state-run plans, says one of the main missions is to increase awareness and offer information about the plans. Many states will hold local events where families can learn more about their state's plan and ask questions.
"You 've got to take action," says Lochner, who is also director of Washington state's GET program, a prepaid 529 plan. "529 Day is to help people get that kind of urgency and take away some of the barriers so they do take action."
Lochner says she knows some families get paralyzed by the prospect of doing a lot of research before opening a plan. The accounts allow investors to make contributions that grow tax free and withdrawals are not taxed as long as they are used for qualified educational purposes. Families can open accounts in any state, and many states have multiple options.
[Learn the do's and don'ts of choosing an out-of-state college savings plan.]
"It's just like anything else," she says. "You have to do a little due diligence, but don't use that as an excuse for not starting sooner than later. I think some people do. They get a little paralyzed."
Many of the promotions are targeted at families with new babies to encourage families to start saving early. Giveaways to families with babies born in May -- or on May 29 -- are offered in Virginia, Idaho, South Carolina, Vermont and Alabama.
"Even though it feels like a lot, the minute the baby is born, that's when you should be opening these accounts," Lochner says.
[Get advice on how to kick off college savings before a child is born.]
Cathy and Alan Fitch, who live in Richmond, Virginia, won Virginia529 inVEST plan savings accounts, stocked with $529 each, when their twins were born on May 29, 2009.
Although they likely would have opened college saving accounts for their kids anyway, winning prompted them to start automatic monthly contributions, which they might not have done otherwise.
"We always hoped that we'd start saving and that they would go to college," says Cathy Motley-Fitch. "Winning really jump-started everything, gave us a head start, and motivated us to start right away. As soon as that happened, then monthly we've been contributing."
When they had another son two years later, they opened a 529 account for him right away.
Trying to save for college? Get tips and more in the U.S. News College Savings 101 center.
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