529 Plan or Savings Account?

Blocks spelling out 5-2-9 on top of a stack of money.

Most people want to save for their child’s college education, but many don’t know how to begin. According to a recent survey by T. Rowe Price, nearly half of parents surveyed are using a regular savings account to save for college, 31% said they were using a 529 account and 28% said they did not know what a 529 plan was.

The average price of tuition and fees at a public four-year university in the United States in 2014 was $9,139 per year. In 1971 those costs added up to less than $500 (in current dollars) according to the College Board. That increase is outpacing the rate of inflation.

Michigan’s three different 529 plans offer parents and grandparents a variety of options to start saving for college.  MET is offering a new “Pay-As-You-Go” payment option this year to help make it easier to start saving. In addition, MESP accounts can be opened with as little as $25.

Experts agree 529 accounts are a great way to save for education and any amount parents can contribute is beneficial for their child in the long term.

According to the College Savings Plans Network, Americans own more than 12 million 529 accounts which have more than $258 billion in assets.