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New and Expecting Parents: Plan Now for Future Financial Needs
Expecting a baby can be one of the most exciting times in life! It’s also the perfect opportunity to consider and plan for future financial needs, including those of higher education costs. The Education Plan®, New Mexico’s 529 college savings plan, provides an opportunity to save for future education costs. If you start early, when your child is born, the power of compounding goes to work for you. Investing, as with many things in life, benefits from an early start.
Evaluate Your Budget
Even before your child is born, you can start planning for the future. Every person’s individual budget and needs will vary. What is important is to capture necessary or mandatory costs within your budget and determine how much you might be able to set aside and contribute to future savings. Reevaluating your budget periodically is important, especially when new life changes occur, like expecting a new baby.
Investing early may also help develop disciplined spending and savings habits. According to the CSF 2022 State of College Savings Survey, 65% of all parents were saving for their child’s higher education; and 46% of all parents had saved at least $5,000 per child. Additionally, 29% of all parents are saving in a 529 higher education plan; and three-quarters of those parents are saving through recurring – annual, quarterly or monthly – contributions. Focus on your budget, cut expenses where possible and turn extra funds into additional contributions to savings, such as your 529 plan(s). One of the best ways to save for higher education is to open a tax-advantaged 529 education savings account with The Education Plan. It requires no minimum contribution and can be opened at any point in your child’s life – even at birth. It’s never too early to start saving for higher education costs. You can minimize the need for future debt for you and your child for higher education needs with a 529 plan. Qualified withdrawals and contributions are free from federal income tax, and earnings are compounded, so your investment grows as your child grows. For those who live in New Mexico, you may also deduct your contributions to your 529 account with The Education Plan from your state income tax if the money is used to pay for qualified education expenses.
The sooner you start saving for future education costs, the more options your child may have when they reach college age. 529 plan savings may also reduce your need to borrow and incur debt for higher education costs. Apart from the tax advantages, The Education Plan makes it easy to contribute. You may open your account with The Education Plan with any amount and contribute as much or as frequently as you like or are able. You may contribute lump sums, such as year-end savings, tax refunds, bonuses, or inheritance; or contribute more regularly through automatic withdrawals from your paycheck. Another way to save money now for your child’s future higher education expenses is to inform grandparents, friends, and other relatives that they can also to add to the fund. The Education Plan, allows for easy gift-giving using Ugift. You can provide family and friends with your unique Ugift code that they can use to contribute to your account quickly and easily.
Stay Up-To-Date on Rising College Costs
College costs generally rise year over year. Regular contributions from you and your loved ones will help to keep up with the rising costs by saving now. Over the last 10 years, published in‐state tuition and fees at public four‐year universities increased at an average rate of 2.2% beyond inflation, according to the College Board. The average total cost of college for a full‐time, in‐state student at a public four‐year university is over $27,000. The funds in a 529 education savings account can be used to cover a variety of education expenses, such as tuition and fees, room and board, textbooks and required technology. These “qualified education expenses” can be used at 4-year colleges and universities, community colleges and technical schools, and more, as long as your child is enrolled part-time.
To learn about The Education Plan® visit The Education Plan.