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529 for younger sibling (programming.dev)

submitted 1 month ago by JumpingPants@programming.dev to c/personalfinance@lemmy.ml

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Hi, there. I want to start saving money for my younger sibling so they can go to college easier.

I have financial aid and managed to get a scholarship to pay for a good amount.

I don't spend a lot of money. So I can put some aside every month for the next 5 years. Wouldn't the rates be pretty good to put money into?

Any reasons why I shouldn't be trying this? Should I save for myself or something? The potential earnings seem like a better idea.

https://www.fidelity.com/529-plans/overview

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[–] plantsmakemehappy@lemmy.world 5 points 1 month ago

You could do half for you and half for the 529. I wouldn't solely do the 529, you never know what the future holds.

[–] WhiteRice@lemmy.ml 2 points 1 month ago* (last edited 1 month ago)

If your goal is the save for education a 529 is a good choice for tax free growth.

Your returns are based on your investment strategy, but the earnings would be tax free. Assuming modest growth of 4% per year what you put in today would be worth 22% more in five years.

Should you be saving solely for your sibling’s education depends on your personal financial strategy. There are plenty of guides online on how to prioritize your dollars. I like money guys financial order of operations.

[–] CircuitGuy@lemmy.world 1 points 1 week ago

The main benefit of a 529 is its gains are sheltered from taxes. If you're in high school or college, you probably don't pay a high tax rate, if any. I like a 529, but I wonder if it would be simpler for you to save in a regular bank account. There's nothing wrong with the 529, though, if it's not too complicated to set up.