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Saving for Education 101: The 529 Plan

What they are and how they've changed.

Jake VanKersen: Sitting down and figuring out how to pay for college one day in the distant but fast-approaching future can feel daunting. One often used option is a 529 savings plan. What is it? How does it work? And what are the strengths and limitations?

Madeline Hume: 529s are a strange beast in the investing world. Basically, they are tax-advantaged investment accounts that grew out of prepaid tuition plans, which help families save for college by buying tuition units that they could then use for a future date. But these prepaid plans were limited to specific universities or school systems. 529s eliminate that inflexibility by allowing investors to save and invest that money in either stocks, bonds, or a combination of both in order to appreciate their savings over time to help fight tuition inflation.

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