It’s that time of year to give gifts for those we love. However, there is a lot to consider. Sick of materialism? Supply chain issues making it hard to find gifts? Want to have a smaller carbon footprint by nixing wrapping, transportation, manufacturing and waste? Want a gift that grows? A gift that will lead the recipient to a better life? Then consider giving the gift that continues giving well into the future.
You may have heard of a 529 college savings plan. The Nebraska plan is called NEST 529. With a 529 account, you can save for a child’s (or adult’s) education in an investment account, potentially earning much higher yields than typical savings accounts, and enjoy some tax benefits. If you think you know what it is, but are hesitant about it – check out 529 plan myths.
A 529 plan is a great gift for the kids who have too many toys or a gift for a baby. It’s a great way to teach young people about investing and financial growth and it helps lead them to their future education and careers. By giving a gift toward a child’s college savings – you’re teaching them the value of saving and investing in the future. That’s money well spent.
Haven’t thought about saving for college yet or think your child is too young? It’s never too early (or late) to save for college. If your giftee already has an account – you can contribute to it. If they don’t already have one – and you would love to continue giving in this way – you can open an account for them.
Here’s how the NEST 529 plan works.
Account owners and beneficiaries
An account owner is the person who manages and contributes to the account. The beneficiary is the student who will benefit from these funds. You may be a parent with a 529 plan (owner) that you started for one of your children (beneficiary). Perhaps a grandparent (owner) started one for the same beneficiary. There can be more than one account owner (and account) for each beneficiary. Each account owner can have accounts for several beneficiaries. An account owner can even have themselves as the beneficiary, although minors cannot own accounts. Account owners always remain in charge of how the funds are invested and withdrawn.
Beneficiaries can be changed to another family member of the original beneficiary. Also, ownership of accounts can be changed – and multiple accounts with the same owner and same beneficiary can be combined when desired.
Used for continuing education and related expenses
529 funds must be used for qualifying higher education costs. So, this money is specifically for college, trade school, books, room and board, and other college expenses. You can rest assured that your money isn’t going to get wasted on something trivial. The funds can even be used for apprenticeship program expenses. Check this extensive list of qualified schools.
If the beneficiary later decides to not go to college – the account can be changed to another member of the beneficiary’s family. The funds can be left in for a later date – maybe if your child doesn’t go to college, your grandchild will. The money can also be withdrawn for non-qualifying purposes – subject to tax and fees.
Oh yes, there are tax perks. Money put into a 529 plan is tax-deferred, which means you won’t pay taxes on earnings as long as the funds are used for qualified expenses. Qualified withdrawals aren’t taxed either. Also, Nebraska allows account owners to deduct their contributions to the NEST 529 plan, up to $10,000, from their state income tax.
Learn more about the NEST 529 program and how you can start saving for college on their website.