It's excellent that you're looking into setting up a 529 account for your child! However, you mentioned that you yourself are a student, and in a low income tax bracket. In this case, you might want to first ensure you are addressing your own debt obligations, taking advantage of your retirement options (e.g. 401(k) if available and Roth IRA), and that you have an emergency fund set aside:
- Most students have significant debt obligations and, in the most severe cases, revolving credit card debt. If you're looking to set aside some money for your child, it's usually a good idea to take care of your own debt first so that you don't inadvertently put an undue burden on yourself and them down the line.
- If you are employed, take advantage of your employer match - if available - to maximize your retirement savings. If you aren't meeting your employer match, you're leaving money on the table. Even if you're not employed, if you have money to put aside, a Roth IRA is generally a good idea. It's one of the best retirement savings options available, since you put in after-tax assets, they grow tax-free until retirement, and you can withdraw the principal at any time. Do a little Googling on Roth IRAs.
- In the case of an emergency fund, the generally rule of thumb is to have three to six months living expenses set aside for unexpected issues, such as flooding, unforeseen health issues, etc.
Even if you've addressed these items, it may still be a good idea to look at a 529 plan. Some states offer matching grants, scholarships, and tax benefits for residents. In fact, since you're a student yourself, there might be an opportunity to get some immediate tax or matching benefits depending on your state, so take a look at your home state plan to see if there are any programs that might help both you and your future beneficiary.
VP, Research & Development
This information does not constitute tax advice and is provided for informational purposes only. Please consult your tax advisor, financial advisor, local taxing authority, and/or plan provider or sponsor for more information.