Kirk and Becky Eckhardt’s daughter, Cassidy, is a senior accounting major at Nebraska Wesleyan University in Lincoln. They also have sons Carson and Carter. The Eckhardt’s are utilizing Nebraska’s NEST 529 college savings plan to save for their three children’s college expenses. This is their story.
Why did you choose to invest in a 529 account?
We wanted to have money saved for college expenses and to have our children graduate debt-free. We’re glad we had the 529 plan as it alleviated a lot of possible financial stress when the first tuition statement arrived. It was also important for us to save ahead of time because the cost of a college education continues to increase, and we don’t qualify for federal financial aid. The other primary reason we started the plans was because of the tax advantages. NEST contributions are made with after-tax dollars, and earnings grow federally and state tax deferred. So, you don’t have to pay taxes on the money you’re earning, and any investment growth is yours to use for college expenses.
Did you have any hesitancies about opening a 529 account, or was the process intimidating?
Opening an account can be intimidating to anyone. One hesitancy was wondering what would happen to the money in the account if one of our children decides against going to college. Another concern of ours was what happens if one of our children gets scholarships and we don’t need the entire amount that we set aside? We overcame these fears by visiting with our financial advisor and researching the topics online. It was comforting to learn that you can transfer the money in the account to your other children without penalty.
Editor’s note: If you don’t use all the funds, alternate options include transferring funds to another family member, taking a non-qualified withdrawal and paying a penalty on earnings (also subject to tax), or roll the funds into a Roth IRA (this is new!).
What was your method to add money to the account?
It worked best for us to set up a monthly automatic transfer.
What financial goal did you set when you opened a 529 account?
We aimed high – it was our goal to set enough money aside to pay for the average cost of a four-year university. Our financial advisor helped us project this amount for when our children will be beginning college, and then helped us determine how much we needed to contribute each month.
How much has your 529 account contributed to Cassidy’s college costs?
Our 529 account is paying 100% of Cassidy’s college education (less her academic scholarships). Starting the account when our children were young allowed us to save enough to do this.
What advice would you give other families who are saving for college?
We strongly recommend starting a NEST 529 plan for your children at a young age or as soon as possible. It’s amazing to watch the 529 account grow, and it can greatly reduce financial stress when your child starts college. The tax benefits and advantages are also great reasons to start a plan.
I learned that my parents had a 529 plan for me when I was in middle school. I felt very fortunate that a large portion of my college education would probably be funded through the plan. However, as I got older and into high school, I learned that the market can be very volatile and that I also needed to focus on my studies in order to receive academic scholarships to help fund my college education.
I feel very fortunate that the 529 plan was in place. Outside of my academic scholarships, I didn’t have to worry about where the remaining tuition money would come from. I was able to focus on academics and take extra classes, and after only three years at Nebraska Wesleyan, I am now set to graduate in May with a double major in accounting and data analytics.
Thanks, Eckhardt family! Your willingness to share your story can encourage others to begin saving for their child’s future college expenses.
By Kristin Ageton