There are a few ways to save for college, and one of the most often used is the 529 College Savings Plan.
With a 529 plan, you can contribute aftertax dollars into an account that then grows tax-free and can be withdrawn tax-free to cover qualified educational expenses like tuition, mandatory fees, books, a computer, Internet access, and room and board.
You can also use a 529 plan to pay for grad school, trade school, and, in some places, even K-12 private education.
If after all the educational expenses are covered, you can even transfer the remaining funds to some family members including parents, siblings, step-siblings, first cousins, and some in-laws.
Certain states offer tax benefits for their 529 plan. However, if your state does not offer attractive tax benefits or another state’s 529 plan is more appealing, you may also be able to contribute to that 529 plan.
To sum it all up: 529 Plans offer tax benefits that let you spend tax-free money on qualified educational expenses, and you should start your research by checking with your own state.
For more information on 529 Plans, visit Morningstar.com.