NEW YORK (Reuters) - For some people, the magic of compound interest alone is enough to sell them on a 529 college savings plan, but others seem to need more incentive.
Indeed, 70 percent of respondents in a new survey by investment broker Edward Jones didn’t even know what a 529 plan was. Introduced in 1996, 529s are savings plans where earnings are tax-free as long as they are used for college expenses.
Enter 529 Day, appropriately designated for May 29, aimed at raising awareness about the importance of saving for university and the advantages of a 529 plan.
Geared toward parents of newborns and preschoolers, it’s designed to help them get over the hump of signing up for a dedicated education savings account.
“Parents hear about high costs of higher education and they freeze. They’re not sure what to do, so they don’t do anything,” says Mary Anne Busse, a spokesperson for the College Savings Plans Network, a trade group for individual states’ 529 plans.
The group's website features an online map with information on special events for 529 day around the country by state(here).
The big efforts this year focus on giving away money to help seed college savings plans - amounts from $529 to $5,290. There’s a myriad of smaller giveaways, too, like ice cream, zoo and museum admissions, and piggy banks.
A few states are targeting parents of newborns with a $529 investment in the state plan. Virginia is offering a $529 contribution for the baby born closest to 5:29 pm on May 29 at participating hospitals. In Connecticut, it’s the first baby born in the state. In South Carolina, it’s any baby born on that day. (Be sure to read the fine print for eligibility details.)
There are also ongoing efforts to get parents to save for college that extend beyond May 29.
In Nebraska, the state 529 plan is sponsoring an exhibit on banking at a popular children’s museum. It’s also holding a national “cute baby” contest through June 6 for children up to 18 months old - 70 percent of the Nebraska plan participants are from out of state - with a random drawing for prizes totaling $10,000. So far, 100 photos have been submitted.
Also aimed at parents of young children is a new book on college savings, “Everybody Freaks Out! (But it’s going to be okay),” sponsored by The Education Trust of Alaska and the College Savings Plans of Maryland, with support from T. Rowe Price. It’s a full-color story book about parents who get scared when they see how much college will cost - mom hides in the shed, as “Dad dug a hole and stuck in his head.”
The book is part of a new focus at T. Rowe Price based on research that the triggering event most likely to get parents to sign up for a 529 is the birth of a child - not kindergarten, or entering middle school, or any other time.
“We get four times as many accounts open at birth than any other age,” says Stuart Ritter, T. Rowe Price’s senior financial planner.
There’s also Sallie Mae’s ongoing Upromise program, which allows families to earn cash toward college for credit card purchases. Company research has shown that opening a Upromise account is often the first step people take. Once they accumulate a balance, they open a 529 account to deposit the cash.
About $100 million has gone from Upromise into a 529 account in their network, says Debby Hohler, director of communications at Sallie Mae. Another $100 million has been invested in plans outside the Upromise network.
The marketing skews older for the Private College 529 Plan, which allows parents to pre-pay blocks of tuition at today’s rates for participating schools. The message: It’s never too late.
Except, of course, if you don’t act by June 30.
Tuition rates go up annually on July 1, so if you want to lock in this year’s rate, do it soon or pay more.
While there are no outright incentives, there’s an online and radio campaign for private 529 plans centered around 529 Day.
“What we consider the incentive is that tuition rates are about to increase,” says Nancy Farmer, president of Private College 529 Plan.
Don’t worry if you miss out on the marketing hoopla - you’ll get another shot in September during National College Savings Month.
Editing by Lauren Young and Bernadette Baum