Payday should be more than a reminder on your calendar — it should be a national holiday. After all, can’t we celebrate the day that our hard work turns into cold hard cash in our bank accounts? Okay, that may be a little over the top, but you get the idea.
So, what about celebrating payday by allowing your paycheck to work for your family’s future? If you haven’t already set up a 529 college savings account, you’ve probably thought about it. We’ve all read about the high cost of college. Consider this, one study found that about 40 percent of students weren’t able to enroll at their first-choice college because they couldn’t afford it. Will that be your child?
The good news is that payday can help you save for your child’s future education needs, just like you save for your retirement. Most people already save for retirement through their employers. Whether you’re saving with a pension or 401(k), the money is automatically transferred from your payroll check, straight into your retirement account.
You don’t have to think about making the contribution, because it happens automatically. The money grows over time through regular contributions and investment performance. Retirement accounts give you the security of knowing that the money is being saved for your golden years.
Just like a retirement account, 529 payroll deductions can be automatically transferred into an education account to save for the future. There is one important difference between retirement accounts and 529 accounts. Retirement accounts use pre-tax dollars and 529 accounts use post-tax dollars. However, both are tax-advantaged accounts and make saving convenient and consistent.
You can also increase how much you save when you get a raise at work. The money is not controlled by your employer, so if you change jobs, the 529 account is not affected. You control the investments and can make additional contributions in addition to regular payroll deductions.
A savings calculator can help you reach savings goals for your child’s future. Every little bit helps!
If your company doesn’t already offer this benefit to employees, it could be because they don’t know it’s available. NC 529 has a free service to help employers set up this important benefit. Representatives are also available to walk them through the process. There are no enrollment fees for companies or employees.
If your employer does not plan to offer the plan through payroll deduction, that shouldn’t stop you from saving. You can set up automatic transfers from your personal bank account to a 529 plan.
Automatic payroll deductions are not the only benefit of a 529 account. NC 529 tax benefits mean the earnings will not be subject to federal or North Carolina state taxes if it’s used for educational purposes. Funds can be used for:
There are many ways to save for college and meet your savings goals. The important first step is opening an account. Contributions start at $25; so you can start small. After that, 529 payroll deductions are a great way to set it and forget it. Let the savings grow until your child needs the money for school.