(WCNC - Charlotte) - With kids heading back to school as inflation soars, many parents may be concerned about rising tuition bills.
The economic volatility is having an impact on college savings plans, too.
Inflation is forcing some colleges to raise tuition by as much as 5% while interest rates for student loans also go up. Experts say investing is key, and a 529 plan is one way to save for a college education over time.
“That allows you to invest the money, and then it grows tax-deferred, so there are no taxes on it," Mark Henry with Alloy Wealth Investment said. "And then as it grows, and then as long as you spend it on a qualified expense, something that is for the tuition of a child, then you actually never pay taxes on the money."
But it does come with risk. And the recent volatility of the market has caused 529 plans to take a hit in the last few months.
“We expect times like this," Scott Fligel, a wealth management advisor with Northwestern Mutual, said. "To expect that you’re going to get involved with any investment account and it’s just going to go straight up and not go down, that’s not realistic."
Fliegel said times like these always pass and the stock market has always recovered. The 529 plans can still be a good option, especially for those with younger kids who have more time to weather the storm.
“If you have time and you can allow things to grow you can stomach the ups and downs and remember this is still a longer horizon out and if you start earlier, it's less you have to put in and it doesn’t seem quite as intimidating,” Fligel said.
By Chloe Leshner (WCNC)
August 3, 2022
