On my walk to work today, I noticed a huge banner on the side of a church on Grand Avenue. It read “Financial Peace University” and it featured a photo of a smiling, middle-aged man. Wouldn’t that be something, I thought: a school that would teach you how not to worry about money!

It made me think about one of the greatest gifts I just gave my daughter, who graduated from college a few weeks ago: no student loan debt. I may not have attended Financial Peace University, but between my daughter working during school and my financial investment in a 529 college savings plan many years ago, we achieved a goal that feels monumental.

My financial planner and friend since middle school, Nancy Epstein (a Certified Financial Planner with Protected Investors of America) convinced me years ago that a 529 plan—which allows your investment to grow tax free until you need it for educational expenses—is a good thing. It’s particularly useful if, like me, you correctly anticipate the triple whammy—aging parents, college for kids and retirement for yourself—all hitting at the same time. Ouch.

Nancy, who will be opening an office in Rockridge soon, tells a great story about a savvy young couple who opened a 529 account when their daughter’s first birthday was approaching. They made a video, accompanied by a letter, and sent it to all their relatives on behalf of their baby. Accompanying Dad on guitar, against a backdrop of baby photos, he sang movingly about making a cash donation to the new baby’s college fund. Grandparents, aunts and uncles got the message—and got into the habit of donating to the cause at every birthday. The baby is now 8, and the account has close to $40,000, thanks to the power of compound interest.

Which is why it didn’t seem as strange to me as it did to some of my childless co-workers when ScholarShare’s California 529 College Savings Plan, the state’s official 529 plan, stepped up to sponsor a number of Fairyland’s most popular events. I have to admit that I wondered whether overworked parents of toddler-age children would have the bandwidth to think about their little pirate or fairy princess someday attending college or a trade school, and that starting early to save would make good financial sense.

But ScholarShare’s Brian Gorban, who mans a table at their sponsored events, finds that young parents are very interested in learning about how 529 plans work. They are grateful to learn about how one state’s plan can be applied to schools in other states—with ScholarShare, the money is also free of state income tax—and a 2010 Washington University study that found kids who have college savings accounts are almost seven times more likely to attend college than kids without an account.

Once parents (or grandparents, or other relatives for that matter) have chosen a plan, they make the decision about how the money is to be invested. One common option is an age-based portfolio, where investment allocation automatically becomes more conservative as the child approaches 18.

Nancy, the financial planner, offers her clients’ children some free counseling, using the 529 plan as a tool for the kids to learn about investing. “When they can understand the link between money and a goal, they can appreciate that money is a tool, and not the goal,” she told me.

ScholarShare has a great Facebook page with more than 29,000 fans. The page has all kinds of fun facts and useful information for anyone considering opening a 529.

And me? I’m excited and happy to be closing my own 529 account.


Editor’s Note: This piece reflects an individual opinion and is not a reported story from Oakland Local. Oakland Local invites community residents to share their views about events and issues in Oakland. 

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