As the New Year 2023 begins, consider an important New Year’s resolution that includes financial planning for a loved one’s future education with a 529 plan. One goal that is realistic and for which you can track progress is contributing to your child’s 529 education savings account with The Education Plan®. 529 accounts not only cover many college expenses, but also provide tax advantages and can help combat the rising cost of education, making it a practical, useful, and very doable resolution – one that allows you to watch your investment as the year progresses. Here are just a few reasons to commit to saving in 2023.

Tax Advantages

By contributing to a 529 education savings account, you will not only help your child better afford college, but also experience tax advantages for yourself. You pay no federal taxes on earnings or withdrawals, as long as the 529 funds are used for qualified education expenses. And, contributions are compounded, meaning that any earnings are reinvested in the savings account, and have the opportunity to grow over time. If you are a New Mexico resident, you may also claim an annual state income tax deduction for all contributions to the account if the funds are used to pay for qualified expenses. Traditional savings accounts do not provide these tax advantages.

Flexibility

Contributing to a 529 account for your children is not limited to a one-time resolution, but it’s an investment that has the potential to keep on growing. You may open an account for your children at any age, whether they are 2 or 20, at any time, with any amount (as long as your contribution does not go over the lifetime maximum of $500,000 per beneficiary).

Comprehensive Coverage

The funds from a 529 education savings account can be used for qualified education expenses. Qualified education expenses include tuition, room and board, textbooks, lab fees, computers, internet, and software, if they are used for academic purposes. Funds may be used at a four-year or two-year college, vocational school, professional school, community college, or graduate school nationwide. One caveat: if you spend the funds on non-qualified expenses, such as transportation or cell phones, your withdrawals are subject to tax and a 10% penalty on earnings.

Ease of Use

One of the easiest ways to contribute to a 529 education savings account is by setting up automatic payments from your bank account an Automatic Investment Plan. When you receive a raise or other salary incentive, consider increasing your automatic contributions to celebrate these accomplishments. With this relatively simple action, you can grow your child’s investment steadily over time. Lump sums from refunds, rebates, bonuses, gifts, or rollovers are also good investment sources. In fact, others may be similarly motivated to support your children’s academic aspirations through a gift contribution to your 529 account. The Education Plan makes it easy through Ugift, which provides a unique code that you can share with friends and relatives. Downloadable and printable gift certificates are also available.

The Smart Choice

Contributing to your 529 education savings account should be considered a priority throughout the year. Setting a commitment to contribute every month at the start of the year is a great way to make sure it continues to happen. It’s hard to believe, but soon your child will be looking forward to higher education. With the kickoff of a new year, be sure to make a lasting commitment to your children’s future education and help them graduate with less debt.