Taking baby steps toward a 529 plan

http://www.savingforcollege.com/articles/20100730-taking-baby-steps-toward-a-529-plan

Some states want to help you celebrate your new baby. They're connecting early with parents, using giveaways, contests and other efforts to promote opening a 529 plan now and not waiting until preschool or later.

"A family that benefits from one of the programs in a state at birth or who starts to save early is going to be much more likely to send their child to college than someone who starts much later," says James Boyle, president of the College Parents of America, an advocacy group based in Arlington, Va.

An early 529 plan also can solve the dilemma some parents face about what age to start saving for college because they're deciding from birth to set aside money that will be used 18 years down the road.

"It's a big push to bring in newborns because there's no better time to start. It's starting a discipline (of saving) at the right time," says Joan Marshall, chairwoman of the College Savings Plans Network, a clearinghouse of information on state-administered 529 plans. "When you have a newborn, it is a time when families get quite a few gifts. What better thing to do with a lot of that money other than buying baby toys that the child is going to grow out of in no time (than) really making an investment for that child."

Who's reaching out to newborns

States generally try to either give parents details about their 529 plans as part of the stack of information they receive at the hospital or that's included with the birth certificate. Some have tried the birth certificate connection but others aren't permitted to do so, Marshall says, making their links with hospitals even more important.

But she's noticed newer efforts to pique parents' interest enough to open a college savings account that have included giveaways and contests.

"It also coincides with increased effort on the part of 529 plans to make it easier for friends and family to make gifts for a newborn child," says Marshall, also executive director of the College Savings Plans of Maryland.

Some giveaways are monthly or quarterly, and others are special events, so it's good to check with your state to see what it offers.

In Iowa, the Baby 529 College Savings Giveaway is a monthly drawing where one infant born in an Iowa hospital during the month wins a $1,000 College Savings Iowa 529 Plan account.

"Every mother who walks in the door, whether she's rich or poor, can sign up. If the computer picks your name out, you're a winner," Iowa Treasurer Michael L. Fitzgerald says.

Helping parents think of the future

The Iowa monthly contest began in July 2008, when the state launched the effort after realizing that a New Year's Day baby contest wasn't giving the same opportunities to babies born throughout the year. The goal is to spread the word that parents should think about a 529 plan when they're having a baby, Fitzgerald says.

"Don't forget about this important aspect of preparing for the future," he says.

And apparently, many don't. About 30 percent of parents who register for the contest, start an account, Fitzgerald says.

A privately funded program in Maine, the Harold Alfond College Challenge, provides a $500 grant for parents of each new Maine baby to start a state NextGen 529 plan account for college savings. In Indiana, quarterly drawings are held for parents who sign up with the information included in new parents' kits they receive at the hospital, Marshall says.

Other efforts are tied to annual or special events. The Virginia College Savings Plan celebrated 529 Day in May by awarding 529 plans for college savings with a balance of $529 to infants born on May 29 and closest to -- but not after -- 5:29 p.m.

Whether you win or not, it's great that states are using contests as a springboard for you to think about the future by starting a 529 plan, Boyle says.

Posted July 30, 2010