Why your kid needs a 529

In 2041, the average 4-year public university will cost around $300,000. That's assuming the university is currently charging in the realm of $30k per year and building in 5% inflation. You'll need more for a private university. So if you have a newborn, get saving!

A 529 can help. A 529 is a tax advantaged account. It allows parents to save for their child's education as a named beneficiary. The funds benefit from compound interest--estimated at 7% growth per year. The money can then be used for a myriad of things:

Up to $10,000/yr can be used for elementary or secondary education. So if you find your public school isn't cutting it or you started a plan before your child was born and thus have potential excess, you can enroll them in a private school and use it to cover tuition.

529s are primarily however used for college expenses. The expenses have to 'qualify' but quite a lot does including tuition, additional school fees like a meal plan, books and other supplies, and even housing. This includes living off campus and paying for groceries instead!

But even if your child decides not to attend a 4-year university, they can still use the funds. 529s also pay for associate programs and even trade or vocational training. And again, additional expenses for housing and supplies still qualify. So your future plumber can buy tools.

And there are few downsides to a 529. If your child has funds leftover, they can be given to another beneficiary like a sibling, saved for a possible re-training down the road, or even transfer them to their retirement account.

The only real downside to a 529 is in the event your child decides not only not to go to any place of higher education or training but also doesn't want the money to jumpstart their retirement account. If that's the case and they want to cash in, they'll take a big 10% penalty.

So go ahead and start up a 529. It's one of the best ways to ensure their future.