One of the most common questions parents have about an NC 529® Plan is when should I set up an NC 529 Account? It’s a simple question with a straightforward answer — now! That’s because it’s never too early to start saving for your child’s higher education.
Here are a few reasons why you might want to enroll in the NC 529 Plan and create an account for your child today:
More time = More money saved.
Simply put, if you save at a consistent rate over time, starting earlier allows you to make more contributions. The minimum contribution to an NC 529 Account is as little as $25. One easy way to get started is to take a set amount out of every paycheck. If you think of your contributions as something that you do consistently in every pay period, there are simply more opportunities to add money to the account between today and the time your child goes to college than if you wait five or 10 years to begin.
More time = Longer investment in the market or accrual of interest.
When you open an NC 529 Account, you will allocate your contributions to the investment option(s) of your choice, depending on your risk tolerance. The NC 529 Plan offers several investment options: there are conservative, moderate, and aggressive age-based portfolios, as well as individual multi-fund or single-fund investment options from which to choose. You can control the investment mix to help meet your college savings goals.
For example, one of the Plan’s more conservative investments is the Federally-Insured Deposit Account, offered by the State Employees’ Credit Union. While the interest rate may change, as of March 29, 2017, the Federally-Insured Deposit Account provides an interest rate of 1.50% with an annual percentage yield of 1.51%. The longer your money remains allocated to the Federally-Insured Deposit Account, the more interest will accrue.
More time = More saved due to tax breaks.
While earnings are not guaranteed, one of the benefits of an NC 529 Account is that any earnings on your investments are free from federal and North Carolina income taxes when used for qualified higher education expenses. The amount that may be saved because of those tax breaks adds up over time. More money earned in the account equates to more tax dollars saved.
If you’ve read this and feel like you’ve waited too long to get started, fear not. While starting to save for college early is ideal, it’s also never too late to open an NC 529 Account either. After all, having some savings is more helpful than having none when it comes time to pay for college. That’s why, regardless of the age of your child, now is the time to enroll in the NC 529 Plan. You’ve already made the first step by gathering relevant information; now it’s time to save for your child’s future!