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Saving for College: Little Billy and 529 Plans

Meet Little Billy...

Only Little Billy ain’t so little anymore. Little Billy is now in his thirties, has no job and still lives with his parents. Little Billy has no job because the cost of a college education is so expensive (let’s just give him the benefit of the doubt here).

Okay, we all love our kids dearly, but there comes a point in time when they need to put down that X-Box controller, get a job and leave the nest. But with no college education, how are they going to make a living? And these days it seems like you need to have already made a living just to afford college in the first place. So what’s the answer to getting little Billy off your couch? A college savings plan.

According to, the average cost of attending college continues to rise, and for the 16/17 school year (tuition, room & board, books, etc.) was $24,610/year for a Public 4-Year college and $49,320/year for a Private 4-Year college. While college costs continue to rise, so does the amount of student loan debt, which recently surpassed the $1 trillion mark nationwide.

So with rising college costs, how do we help our children avoid starting their careers with significant student loan debt? One of the best methods of saving for college is by utilizing a 529 College Savings Plan. 529 plans are tax-advantaged savings plans designed to help pay for future college costs. The basic idea is simple. You make contributions to the plan and select investment choices from a variety of mutual funds and other similar investments, much like a 401k or IRA. The beauty here is that no tax is paid on earnings in this account, and no taxes are paid when money is taken out to pay for qualified educational expenses, i.e. tuition, books, room and board, etc. (If the money is used for non-educational expenses, taxes will be incurred as well as a 10% penalty)

What are some other benefits of 529 plans?

  • Anyone can contribute to your child’s plan, including grandparents and that wealthy uncle everyone wishes they had.

  • Simple to set up. You can open an account yourself through the California 529 College Savings Plan at, or contact your financial advisor.

  • Flexibility: If your child ends up not attending college, the fund can be rolled over to another family member

  • YOU are in control of the money, not Little Billy. So you don’t have to worry about Little Billy blowing all his college savings on video games and malt liquor (Of course Little Billy would never do that!)

The key to a successful college savings account is starting early and being consistent. If you had started a 529 plan when Little Billy was born a

nd consistently contributed $210/month, earning an 8% return on your money, you would have approximately $100,000 in college savings ready for Little Billy when he turns 18, thus greatly reducing the chances that Little Billy is still on your couch in his thirties.

For more information on 529 plans and saving for college, visit

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