This is a guest post by Gina Raimondo, the General Treasurer of Rhode Island about saving for college. If you don’t live in Rhode Island check with your state to see what programs they have to help you save for your child(s) future. This post is taken from an article she wrote for a few local papers so you may have seen snippets of it before.
Benjamin Franklin said it best, “A penny saved is a penny earned.”
Whether you’re a parent, a grandparent, or a neighbor—you can make a significant difference in a child’s life by giving the gift of education. One way to help is to open or contribute to a 529 plan, a tax-advantaged investment account designed to encourage saving for future higher education expenses at accredited colleges, universities, and vocational or trade schools nationwide.
In Rhode Island, we offer a 529 plan called the CollegeBoundfund. Treasury oversees the 529 plan’s investments that are managed by AllianceBernstein and sponsored by the Rhode Island Higher Education Assistance Authority.
Understanding the Benefits of a CollegeBoundfund
Rhode Island account owners can receive an “above the line” state income tax deduction of $500 for individuals or $1,000 for a married couple.
At the federal level, your account’s assets will grow tax-free and if the money is used for qualified higher education expenses, you won’t pay federal taxes on earnings either. Also, if you earn under $50,000, you may be eligible for the federal Earned Income Tax Credit, also known as the EITC.
While it’s often easier to focus on our immediate financial challenges, it’s important now more than ever to make a plan for your future. By setting financial goals through personal planning, we all feel more empowered to take control of our finances and make smart decisions.
Student Loan Debt on the Rise
It’s reported that college tuition and fees have swelled 1,120 percent since records began in 1978. The result: college grads are now burdened by student loans that have reached over $1 trillion, according to the Consumer Financial Protection Bureau.
In Rhode Island, 69 percent of college graduates have an average loan debt of $29,097, making us the fourth largest indebted state in the country, according to recent findings from The Institute for College Access & Success, College InSight for 4-year or above colleges.
CollegeBoundfund can be an important tool to help graduates and families avoid these mountains of debt. Aside from tax advantages, the account also offers a wide range of investing options, no annual fees, no income limits, a low minimum, and an easy and secure online gifting tool for loved ones who want to lend a hand.
Since 2000, Rhode Islanders have opened over 15,000 CollegeBoundfund accounts, saving more than $165 million for their children’s education. In 2011, several additional low-cost investment options were added to enhance the program, including two new Vanguard funds and the creation of an age-based conservative glide path, offering more choices for Rhode Islanders.
I’m proud to share that my family is part of this story: my husband and I have CollegeBoundfund accounts for our two children and we’ve had fun teaching them about the importance of saving money and preparing for their future.
So as you continue to manage your finances throughout the year, keep in mind Mr. Franklin’s message: every saved penny counts. Your good choices today can fulfill a dream as big as a college education tomorrow.
To learn more about the CollegeBoundfund or for info about our other programs, visit www.treasury.ri.gov/empower-ri.
Gina Raimondo is the Rhode Island General Treasurer.