There’s no doubt that the to-do list is long for parents of newborns. Recognizing that those first days are busy, and it’s never too early to start saving for education and training after high school, new parents Alex and Kristina Umbhau of Cornwall decided to open a VT529 savings account before their baby was even born.
“Our goals are, like most parents, to have a happy, healthy little girl, which may, a very long time from now, include upper education,” says proud dad Alex Umbhau, whose daughter was born on May 29. “I opened the account before she was born because I suspected (and it turned out to be true) that we would have very little time for activities other than diaper changing, figuring out her feeding and essential chores after her birth.”
A 529 plan is an education savings account specifically designed to help families set aside money for future education costs, with benefits to make saving easier. The funds that accumulate tax-free in those investments can be used for college, training, and apprenticeships. The plan is named after Section 529 of the Internal Revenue Code, the section of federal law that created this type of savings plan back in 1996.
After looking through various 529 options, the Umbhaus decided to open their daughter’s account through the VT529 plan, administered by VSAC, because of the Vermont state tax benefit. As Vermont’s official 529 college savings plan, the VT529 option (also referred to as the Vermont Higher Education Investment Plan) is the only 529 plan that qualifies for a Vermont state income tax credit.
Married couples filing jointly can claim a state tax credit of 10% of the first $5,000 contributed to a VT529 account each year – for a total tax credit of up to $500 for each beneficiary. (Single taxpayers can claim up to half of that amount, or $250 per beneficiary per year.)
Nearly all of Vermont’s most in-demand and highest-paying careers require some form of education or training after high school. Alex and Kristina, who both have college degrees, say they want that to be an affordable option for their daughter.
“My wife and I were both fortunate enough to have our parents help us pay for our undergraduate studies,” says Alex. “Recognizing the impact that this had on our post-graduation trajectory, along with enabling us to do things like purchase a house, we feel that we should do as much as we’re able to provide our daughter with this same financial head start.”
“Education savings accounts are a powerful tool for expanding education opportunity,” says Scott Giles, President and CEO of VSAC. “We want to encourage parents to open a VT529 account and get started early to save for college and career training. The ideal time to begin saving is between birth and age 5 to allow your investment to build over time.”
Alex notes that his parents instilled in him the importance of saving via long-term, compounding growth. “It’s something I believe is generally under-taught, and which I very much want to teach to our daughter,” he says.
“The Umbhaus are ahead of the curve. But it’s never too late to start saving, even if your child is in high school, college or graduate school,” says Giles, adding that relatives and friends can also help fund a child’s VT529 account through birthday, holiday and graduation gifts. Loved ones can contribute online through e-gifting, and you can also purchase “Gift of College” gift cards, which are available in $50 increments at all Vermont locations of Kinney Drugs and Cumberland Farms stores.
Any family who has questions or would like help in setting up an online account can email VHEIPquestions@vheip.org. To learn more about VT529 savings accounts or to open an account online, visit vsac.org/save.
This story is produced by Vermont Student Assistance Corp., created by the Vermont Legislature in 1965 as a public nonprofit agency, to advocate for Vermont students and their families to ensure that they achieve their education goals. Our vision is to create opportunities for all Vermont students, but particularly for those—of any age—who believe that the doors to higher education are closed to them. We begin by helping families save for education with Vermont’s state-sponsored 529 savings program. To help Vermonters plan and pay for college or career training, our counselors work with students in nearly every Vermont middle school and high school, and again as adults. Our grant and scholarship programs attract national recognition, and our loan programs and loan forgiveness programs are saving Vermont families thousands of dollars in interest.
