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529 Plan
Is used to prepare for future educational costs by parents or caregivers for their children. It comes in two forms, a 529 prepaid tuition plan or a 529 savings plan. A 529 Prepaid Tuition Plan is just that. You pay tuition for a particular institution at the current rate. If you gave birth to a child today, you would pay today’s rate, no matter what the college or university charges in 18 years. Even if today the rate is 100 dollars a credit hour, but in 18 years it jumps up to 300 dollars an hour, you still pay the 100 dollars because you technically paid for four years of college at that rate ahead of time; you’re just “using” it later. A 529 savings plan is a savings plan that acts as an investment account. It is comparable to a 401K, as it fluctuates based on market performance and is only used for its intended purpose, educational expenses. It can also be used to pay tuition for children kindergarten through 12th grade attending private schools.