As the cost of college education increases, parents are increasingly overwhelmed at the task of paying for their children’s college. Studies show that 66% of grandparents are willing to contribute to saving for their grandchild’s college education, taking significant pressure off financially strapped parents. Although most grandparents are willing to contribute, many wonder about the best approach to savings.

Hundreds of thousands of grandparents save for a grandchild’s education by enrolling in a 529 plan. A 529 plan is a savings plan operated by a state or educational institution, designed specifically to assist families with educational savings.

If you are interested in saving for a family member’s education, consider three benefits of enrolling in a 529 plan:

1) Tax Benefits- 529 plans offer both federal and state tax breaks, and distributions to pay for the beneficiary’s education are federally tax-free. The Pension Protection Act of 2006 made the tax-free treatment permanent. State tax benefits vary by state.

2) Easy Upkeep- Setting up a 529 involves completing a simple enrollment form, and then determining if you want to make contributions sporadically or sign up for automatic deposits. The assets are professionally managed by the state treasurer or a program manager, so after setting up the account, there is very little maintenance involved.

3) Flexibility- After your original investment (which can be up to $300,000 in many states) you can move your investment into different 529 options. The federal government doesn’t limit the number of changes you can make, and you can replace the account beneficiary with another family member if needed. As the investor, you control the funds and determine how the investment is used. Beneficiaries cannot touch the funds without your permission.

Remember, not all 529 plans are equal, and different states offer different options. Compare the features of individual plans to determine which plan will best help you prepare for your loved one’s education.

Puritan Financial Companies is a diversified financial services firm specializing in helping people from their peak earning years through retirement to secure their financial future. Visit Puritan Life Insurance at www.puritanlife.com. The information contained in this blog post is for informational purposes only and should not be construed as legal, tax, or investment advice.