Hello and welcome to Moneygirls quick and dirty tips for a richer life.

I'm your host, Laura Adams.

In this episode, I'll discuss 529 plans and the many benefits they provide to millions of Americans who use them.

A 529 plan is also known as a qualified tuition program.

It's a tax-favored savings account that has become the most popular way to save for higher education.

The idea is that you contribute money to the plan that can be used to pay for a student's

qualified expenses at a specific eligible school.

A 529 plan can be open for any adult or child in your family or even outside of your family. 529s are generally categorized as either prepaid plans or savings plans.

With prepaid plans you can prepay all or a portion of the cost.

If the student decides to attend a different eligible school,

the funds can still be used for qualified expenses.

However, depending on which plan you have,

there may be a penalty for this transfer of funds.

529 Savings plans, on the other hand, are similar to a retirement account

where your contributions are invested in chosen mutual funds or securities. retirement account

the account,

will fluctuate based on the performance of the underlying investments.

Either type of 529 plan can be set up by states as well as by eligible institutions.

These include colleges, universities, vocational schools, or other post-secondary schools that participate in federal student aid.

The school you're interested in can tell you if they are eligible to accept 529 funds

and if they operate their own plan.

But if they don't operate one, don't worry.

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