Yes, we all love showering our children and grandchildren with fun things to unwrap during the holidays. But, consider reining in those temptations - do they really need another piece of plastic? It's a great time to consider a gift of education using the Virginia529 plans.
Those not familiar with the system, often have many concerns. Let's go through a few of those.
How stable are the investments? Of course, no investment is risk free, but the Virginia529 system has designed programs that fit the age of your child and become more conservative as they approach their college years. And, for the third year in a row, the program has earned a Gold Star rating from Morningstar.
What if my child doesn't attend college? The funds may be used for many purposes, including community college and many vocational or technical programs. Unused funds may also be transferred to another family member.
If I save for college, my child will receive less money in financial aid. It's true that financial aid packages look at the resources of the family. If the 529 account is in the child's name, about 20 percent of the funds will be considered for resources. If it is in the parent's name, about 5 percent of the funds will be considered.
What is the tax break? The tax break is modest - the important thing is to start saving. But, you do receive a Virginia state tax deduction for the contribution and the investment earnings grow tax free. There are no taxes upon withdrawal when the funds are used for education.
So, consider the gift of education...and wrap up a piggy bank to put under the tree!