529 Plan
Definition
A tax-advantaged savings plan designed for education expenses. Money grows tax-free and withdrawals for qualified education costs (tuition, room, board, books) are also tax-free. Each state offers at least one plan, and you can use any state's plan regardless of where you live.
Why It Matters
College costs keep rising — the tax-free growth in a 529 makes a huge difference. Many states also offer a state tax deduction for contributions. Starting when a child is born gives you 18 years of compound growth before the first tuition bill.
Example
Contribute $200/month to a 529 from birth. At 7% annual returns, you'd have ~$86,000 by age 18. Total contributed: $43,200. Tax-free growth: ~$42,800. That covers a significant portion of college costs without ever paying taxes on the gains.
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