A 529 is a tax-advantaged method for one person to save money to pay for another person’s college expenses some time in the future. The 529 is available in two forms: as a pre-paid tuition plan that can be sponsored by the state or by an individual college and as a college savings plan often investing in the stock market or in mutual funds. The 529 is not limited to parents who initiate the savings plan, but often grand parents and other close relative or friend who will open an account on the child’s behalf.
Choosing the best program requires a solid understanding of the difference between the two formats. The US Securities and Exchange Commission has outlined the two most commonly used college savings plans in the following article. [read more]