Mom Life

How to Save for College

By Anna Luther | May 25, 2020

This is a sponsored post. All opinions are my own.

I’ll never forget the first time my husband forced me to meet with a financial planner.

I was extremely pregnant with our third child, I had just quit my job to become a stay-at-home mom, and I knew that this stranger was going to start lecturing me about not clipping coupons for the grocery store.

It ended up being even worse than I thought.

While he didn’t have access to every dime I’d ever spent, he did tell me that I would have to save at least $332,000 to send my three kids to college in 15, 16 and 18 years.

FYI – that is not something you should say to a very pregnant woman that just quit her job and has a 2-year-old and a 3-year-old at home.

I laughed.

Then I cried.

Then I went home and explained to my toddlers (and the child in my womb) that only one of them would be able to go to college.

It’s possible that my husband separated me from the children, fed me, and put me down for a nap.

Fast forward about a year. I was coming out of my new baby stupor and trying to figure out how to keep three kids ages 3 and under alive. Amidst the chaos, we finally set up Ohio 529 Plans for each of our kids.

It was an incredibly quick and easy process, and we’ve been making monthly contributions ever since.

In celebration of 529 Day (May 29th!), I’m teaming up with Ohio’s 529 to share more about how they can help you save for college (even if you don’t live in Ohio) – and why you shouldn’t cry over saving for college.

I’ll also answer some of the questions I had when we first started using this plan (like what if our kids don’t want to go to college, what if they get a scholarship, or what if they don’t want to go to college in Ohio.)

Be sure to keep reading! In addition to answering all of these questions, I’m also sharing information about two exciting events:

First, click here to register for a FREE webinar with Ohio’s 529 and BlackRock Investments. They’ll be discussing how to save (and stay calm) during this volatile market.
Second, head on over to my Instagram page to enter for a chance to win a $250 contribution to your child’s 529 plan! It’s easy to enter!

What is an Ohio 529 Plan ?

529 Plans are tax-advantaged ways to save for college and CollegeAdvantage is the 529 Plan offered by Ohio. The cool thing is that you don’t have to live in Ohio to take advantage of Ohio’s 529 Plan, and your kids don’t have to go to college in Ohio. Here are just a few of the benefits:

The Information I Needed to Know to Move Forward

My husband is super into “tax talk” and enjoys having long and boring financial conversations with me that sometimes include spreadsheets and charts.

Unfortunately, these talks never include him turning into a pizza and being quiet.

I know the tax information and benefits are super important when it comes to Ohio’s 529 Plan, but MY top concerns had nothing to do with the financial advantages of setting up an account. I wanted to know what would happen if my kids didn’t go to college or didn’t want to go to college in Ohio or ended up being an incredible star athlete or mathlete and got a scholarship. Was I potentially going to waste all the money I had saved?

Here’s what I learned:

Even though we have a separate account for each of our kids, we can transfer amounts between the accounts. So if one of our kids DOES happen to get a scholarship, we can transfer that balance to one of the other kids. Or if we have a child that decides college is not for them, we can transfer their college money to someone else.
The money in these accounts can be used to pay for room and board (even off-campus housing), internet services and it includes certain expenses for special-needs students.
I mentioned it before, but just because we set up our 529 plan in Ohio doesn’t mean that our kids need to go to college in Ohio. The funds can be used at any college or university in the United States where federal financial aid is accepted.
Family and friends can ALSO contribute to our kids’ funds and receive a tax benefit. While my 9-year-old probably wouldn’t get too excited about grandma investing in his college fund instead of buying him a remote control car for his birthday, that mindset might change the closer he gets to heading off to school.

My other big concern? The staggering amount we needed to save.

How Much Do you Need to Save?

While our financial planner gave us a big scary number (that maybe was a little higher than it needed to be – in my opinion), Ohio’s 529 has tools and calculators to help you figure out how much you may want to save to be prepared for college.

You can take into account how many years until your child goes to college, inflation rates and the average cost of a year of school. It will show you how much you may want to start putting away each month to help you meet your goal – whether your goal is to pay for 100% of your child’s college or just 25%.

You’ll also see that it’s always better to start now versus waiting a year. But even if your kids are already in high school, there are obvious benefits and advantages to starting an Ohio 529 account now.

Click here to use their free college savings planner.

Once I was able to see that the big scary number that our financial planner gave us could be easily divided into monthly payments over the next decade, it became much less scary and started to feel more attainable. Especially when you factor in the financial benefits.

Which brings me to – the tax advantages…

Pretend that my husband is super excited and jumping up and down while he talks to you about the next section. He will periodically pause and ask why you aren’t as excited about this as you should be. He will also ask you to stop looking at your phone. He will NOT turn into a pizza. He will NOT end his talk early so that you can get back to Netflix. You have been warned.

With Ohio’s 529 Plan, you can maximize your savings with 529 tax benefits, which include:

Tax-free earnings so all investment growth is yours to use.
Compound interest — the interest earned on contributions, earnings, and interest already accumulated in the 529 account — is included in the tax-free earnings.
Tax-free withdrawals for qualified higher education expenses, which are those required costs for attendance at the school. These expenses include tuition; room and board (on and off campus) when the beneficiary is enrolled at least half-time; mandatory fees; computer equipment and related technology as well as internet services; books, supplies and equipment related to enrollment and classes; and certain expenses for a special-needs student.
State of Ohio income tax deduction for any Ohioan who contributes to an Ohio 529 account. The state tax deduction is up to $4,000 per year, per beneficiary. With unlimited carry forward, you can continue to subtract 529 contributions from your state income tax in future years until all contributions have been deducted. Any loved ones who are Ohio residents can also take this deduction if they contribute to your child’s Ohio 529 account.

Click here to create a CollegeAdvantage Ohio 529 Plan for your child to start saving for college tax-free.

Is this Really the Best Time to Start Saving for College?

It would be ridiculous for me to write this entire article and not mention the fact that we are currently undergoing a pandemic, and the future can feel somewhat uncertain.

Luckily, my friends at Ohio’s 529 totally understand that saving for college may not be at the top of the list right now – especially with the current market conditions.

So they’ve teamed up with BlackRock Investments to share advice on how to save (and stay calm) during this volatile market.

Click here to join this free webinar on May 28 at 11 am ET.