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Create Your Own 529 Plan

Create Your Own 529 Plan

Saving for College

Create Your Own 529 Plan

529 College Savings Plans allow you to fund an account that will pay college tuition at state schools; you pay a fixed amount and the Plan will pay qualified expenses even if costs go up by the time your child enrolls in school. If you know you'll need a specific sum to pay for college costs, one way is to buy zero coupon bonds. A zero coupon bond is similar to a savings bond; you pay a fixed price today and at a future date the bond is worth a set amount. For example, you may pay $5,500 for a zero coupon bond that will be worth $10,000 in twelve years. In effect you earn interest on your initial payment, but that interest is not payable until the end of the coupon term.

Zero coupon bonds are a way to invest a considerable sum and receive a set rate of return. They work a lot like Certificates of Deposit, but tend to generate a higher rate of return. So if you know how much you'll need tomorrow, it could make sense to purchase the right zero coupons today.

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