For gift giving occasions like birthdays and holidays, it’s always fun to give kids the latest gadget or toy, but shiny new toys only last so long. If you’re looking for the perfect long-lasting solution and a gift that keeps on giving – look no further. This holiday season ask your loved ones to get your child a 529 plan.
But when everyone wants to get your kids a new toy, it can be hard to divert their attention to giving something that will last longer and be more beneficial. It’s a conversation worth having with close friends and family, and although it can be a tough topic to broach, here’s my top tips on how to convince your loved ones to give to your child’s education.
When your parents ask, “what are the kids into these days?” as a prelude to asking what your child wants, let them know about the 529 plan. It’s an easy way to let them know that you’d rather them make an investment in your child’s future rather than the toy of the month. And when your child is grown, they will thank you and your loved one for helping them cut down on student loans.
If your loved ones don’t typically ask what your child is into for the holiday season, maybe send out a list of gifts your child would love to receive and put the 529 contribution first on the list. If they’d still like to buy them a toy then they have options to get them a small toy or book, while also making a contribution.
Lead By Example
If you lead by example, your loved ones are likely to follow. Start asking the parents in your life if they’ve set up 529’s for their kids that you can contribute to it for the holidays. Become known as the parents who contribute to 529’s!
Most people wouldn’t think to ask for 529 contributions, and it plants the idea to repay the favor when it comes to gifts for you child. The best way to ask, is if you’ve set the example. So, start by giving to other’s 529s to encourage your loved ones to return the favor!
Be Open About Your Goals
Write down your goals for your child’s 529, and why you had decided on that number as the optimal number. Then share that number and reasoning with loved ones that are likely to give your kid gifts for Christmas.
You can use 529 contribution calculators to show how your family how much their contribution could compound and help your child through their academic career. This a great tool to explain why the money going toward a 529 plan rather than a new toy.
Let them know with compound interest, your money is working for you. Your initial investment earns interest, and then your interest earns interest in addition to any additionally contributions. And by saving early and often, you are more likely to be prepared for your child’s tuition.
Explain The Potential Tax Breaks
If you need another trick, maybe mention the tax benefits of contributing to a 529. Depending on the state you live in, they offer tax and financial benefits when you fund a 529 plan. Regardless of which state you live in, money in a 529 plan grows tax-free as long as the funds are withdrawn for qualified education expenses.
One point to note: while there is no limit to how much you can contribute to a 529 plan, most states limit contributions that qualify for state income tax deduction or credit. It’s worth a conversation to discuss the nuances of 529 plans in your state when choosing one for your family.
If you have any questions about 529 contributions, reach out to your wealth advisor for their best practices.