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Start Early for College Savings Plan

July 25, 2014
The Intelligencer / Wheeling News-Register

So, your oldest is getting ready to start college, and now comes the fun part - figuring out how to pay for it.

Thankfully, for parents today there are several available options that can assist them with putting money away early for their children's future, all the while getting a tax break from their state.

One question many parents may not think of is, "At what age should I start a college savings plan?" Though it may seem early to begin thinking of college, financial advisers say parents should begin thinking about starting a plan as soon as possible - even as early as when pregnancy is confirmed.

Peter Holloway, senior vice president at Hazlett, Burt and Watson in Wheeling, said starting a college savings plan early allows for several years of interest to compound and allow for the account to actually make money instead of simply being a holding tank.

"If done right, it can be extraordinary," he said.

Holloway said the best plan available for college savings is a Smart 529 plan, which allows for the money put into the account to appreciate without tax ramifications. By putting a minimum of $25 per month into the plan, the individual receives many breaks, including the opportunity to have the amount deducted from state taxes and the ability to withdraw it tax free when the time comes.

The money placed in a 529 account can only be withdrawn for approved college expenses, which includes room and board, tuition and other expenses - possibly even technological needs, such as a computer. Holloway said the advantage of the plan is that even if the account is started with a particular child in mind, the owner of the account can use it for educational needs as he or she sees fit.

"If you have three children and one gets a scholarship, that money can be directed to other siblings," he said. "If the owner of the account wants to return to school, they can use the money themselves."

Holloway said the plan also is a great option for grandparents or other close family and friends who want to contribute to a child's future. Instead of large sums of cash given as gifts for birthdays and holidays, Holloway said many are now choosing to make contributions to these accounts.

"The major benefit is that once a child reaches that college age, there is a nice chunk of change waiting," he said. "The key is starting early."

David Garcia, a SMART 529 consultant with The Hartford, has more than 25 years of experience in the financial services industry. He also noted that starting early will provide a solid base for funding a child's college education.

"The key thing on this plan is to put money aside and the money has an opportunity to grow through professional managed accounts and the gain in there is it's all tax deferred. When used and pulled out to take care of qualified expenses, it's all tax free," Garcia said.

For more information about Smart 529 plans, visit

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