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Utah's college plan helpful to struggling savers

Published December 17, 2010 8:58 pm

Education • Accounts are easy to open, and small contributions are welcome
This is an archived article that was published on sltrib.com in 2010, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.

When it comes to saving for your child's college education, every little bit helps.

Many parents mistakenly believe they must have a lot of money to be able to open — and fund — college savings accounts for their children. Some aren't even sure where to start.

But you don't need a lot of money — or financial expertise — to start saving enough that can give your child (or grandchild!) the opportunity to be able to attend college. And one of the highest-rated plans, the Utah Educational Savings Plan, is located right here in Utah and has worked to make it as easy as possible to open an account.

While you can start saving for your child's post-secondary education any way you wish, doing so through a college savings plan — also called a 529 plan — can offer several advantages. The biggest one, of course, is that withdrawals from college savings plans, if used for qualified higher education expenses, are generally not subject to federal income tax.

In Utah, residents also may be eligible for a state income tax credit for contributions to the state's UESP plan.

The Utah plan isn't the only good one available, of course, and anyone is free to open a 529 plan sponsored by any state or state agency, even if they aren't a resident. (For a list of available plans, go to Bankrate.com and click on "college finance.")

But most experts agree that Utah's plan, which invests mainly in funds offered by mutual-fund company Vanguard, is one of a number of good choices for those who want to start saving for a child's college education.

Why is Utah's plan considered to be so good? According to investment-rating company Morningstar and other rating agencies, the Utah college-savings plan has a good variety of investment choices for parents or grandparents based on their child's (or grandchild's) age. And the plan's expenses — what they charge account holders to hold and invest their money — are considered to be fairly low compared with other plans. Overall, "the plan's well-managed underlying holdings have produced strong long-term results," said Morningstar analyst David Falkof in a recent report.

One of the key benefits of the Utah plan — the state income tax credit — is available only to Utah residents. (Utah residents can't get a state income tax deduction for investing in another state's plan.)

While the tax advantages (go to uesp.org for more information) are a big plus, one of the best features of the Utah Educational Savings Plan, in my opinion, is its accessibility. The UESP has no minimum initial or ongoing contribution requirement. You can invest any amount of money that you may have — even $5 a month. You also can put your savings on autopilot by channeling monthly contributions from your savings, checking account or paycheck.

The folks over at UESP also know that half the battle is just getting people to open up an account. And to that end, opening an account is very is easy. You don't even have to come to the plan's downtown offices located in The Gateway shopping center to open one.

You can go to uesp.org and open an account online, in the comfort of your own home. Plus, The Utah Educational Savings Plan is offering a $25 bonus for those who open new college savings accounts through Friday, Dec. 24. You must make a contribution of at least $25 and meet other criteria to be eligible for the offer, which is courtesy of Zions Bank.

With all the extra costs this time of year, the holidays are definitely a difficult time to think about saving strategies. But by matching your contribution dollar for dollar, the promotion offers an immediate 100 percent return on your $25 investment. Even better: You just made the important first step in helping your children afford a college education.

Lesley Mitchell writes One Cheap Chick in daily blog form at blogs.sltrib.com/cheap —

Utah Educational Savings Plan

The Utah Educational Savings Plan, in partnership with Zions Bank, is offering a $25 bonus to those who open a new college savings account through Dec. 24. You must be a Utah resident and contribute at least $25 to get the bonus. You also must enter the promotional code 1012HOLI when opening your account online. For more information about this offer, call 800-418-2551. For more information about the savings plan, go to uesp.org.