Recently, our daughter, Baby J, turned one, and we celebrated by having a party like many parents do. But we chose the most important birthday theme that a parent can pick.
Do you want to know what it is? 529.
What is 529?
529 plans are named after Internal Revenue Code 529 and are used for future higher education. In other words, they are college funds. There are two types of plans available: prepaid and savings plans, but currently only 10 states offer the prepaid variety. Every state, however, offers the savings kind.
You complete a simple enrollment form for the 529 plan in your state and make a single contribution, or sign up for automatic deposits. And that’s it! The rest is taken care of! The state is typically responsible for the administrative services and the record-keeping, but the actual investing is outsourced to a mutual fund company or other financial institution. The company takes the money that you have donated to your child’s 529 and invests it in different age-based mutual funds that become more fiscally conservative the closer your child gets to college age.
The Advantages of a 529 Plan
- Everyone is eligible to take advantage of a 529 plan. There are no income limitations or age restrictions.
- Many states offer state income tax deductions for contributions (although there is not federal income tax deduction available).
- The principal grows tax-deferred.
- 529 plans fall under the 2007 College Cost Reduction and Access Act, meaning that they are an asset of the parent and not the child, so they do not impact the student’s eligibility for financial aid.
- The funds can be distributed income tax-free as long as they are used for all college-related expenses: tuition, room and board, books, etc. (But, they can’t be used to pay off student loans and student loan interest.)
- Like I mentioned before , they are a very hands-off form of investing.
What is Ugift?
Erik and I have been transferring money into Baby J’s account monthly. And while these monthly contributions to our daughter’s college fund are extremely important, we became soooooo excited to discover Ugift! Ugift is an online service that makes it possible for anyone to donate to your child’s college fund at any time… Christmases, baptisms, bat mitzvahs, rainy afternoons, and of course, birthdays! All you have to do is log into your child’s 529 plan and click “Ugift” to get their unique code. (Most states have it right there.) Then, you distribute that code to friends and family along with Ugift’s website address.
How We Implemented This
So how did we do this exactly? We made it really easy for invitees. We used Paperless Post! We just made sure there was a link to Ugift along with J’s code right there in the invite. We also made sure to ask people to please consider donating to her educational fund in lieu of traditional presents.
Why This Is So Important
Compound interest is a special, magical thing. If someone donates $15 (a very typical amount for a birthday present), it will be worth $60 by the time your child goes to college. That may not seem like that much of an increase, but imagine if everyone at your child’s party gave $15. Or imagine contributions to your child’s 529 in lieu of presents at every single holiday. Couple that with monthly contribution, and you are now suddenly talking about a lot of money! Guess who is going to be able to go out-of-state for college?!
Baby J’s Party
And what’s great about a 529 birthday theme is that it can go with anything. Do you remember the old Rocky and Bullwinkle cartoons? There were always two titles to every upcoming episode. 529 is like that,
Tommy’s Cardboard Box Birthday and 529
Violet’s Peppa Pig Party and 529
For J, we had a Champagne Brunch and 529. I figured she was turning one, and it was really more of a party for me and her dad. All she cared about was all of the attention and hugs!
Here are a few pics from her big day:
Baby J’s Outfit
Birthday crown from Little Blue Olive
Tulle skirt from Sweet Petite Tutu
Teether Necklace from Little Lemon Treasures
Mocassins from Deerie and Co.
Now, I want to hear from you! What was the best child’s birthday party theme you ever did?
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