The Benefits of an MESP College Savings Account for Kids

It's never too early (or late) to start saving for the future. Discover how the Michigan Education Savings Program, or MESP, can help your family manage future education costs.

College expenses cause stress. It’s a simple truth for parents — whether your child is a newborn or near graduation. Another truth? Opening a college savings account for your kid is a smart way to tame those future costs, wherever you are in your parenting journey.

The Michigan Education Savings Program, or MESP, is designed to help you do exactly that.

This Michigan 529 college savings plan offers both flexibility and stability in the face of those tumultuous costs, including tuition, room and board, books and more.

“The cost of college is a major concern for most families with good reason,” MESP notes on its website. “It is increasing at a faster rate than inflation.” Unplanned financial challenges prompted by a global pandemic haven’t helped matters.

But the good news is that MESP can provide a solid foundation. The sooner you start, the more money you’ll have to help pay for your child’s college dreams.

Here’s a closer look at this plan, how it works and how you can get one started for your child today.

What is a 529 plan?

In a nutshell, a 529 plan is a tax-advantaged savings plan designed to help save for qualified higher education costs. The “529” refers to the Section 529 of the Internal Revenue Code.

MESP is similar to a 401(k) or Roth IRA in that you take after tax contributions and invest for your loved one’s future. MESP offers 18 different investment options to meet everyone’s investment strategy. These grow, tax-deferred, over time (note that funds do fluctuate with the economy).

When you ultimately withdraw the funds for higher education expenses, you’re not taxed. Your MESP funds can be used for in-state or out-of-state schools. And, specifically, you can use them to cover tuition, room and board and additional college costs.

Keep in mind that you can’t deduct your contributions from federal income taxes.

How much to contribute

“It only takes $25 to open an account and that is the minimum amount one can contribute. You can contribute as often or as infrequently as you like, weekly, monthly, once a year at bonus time,” says Jennifer Burke, senior marketing manager for MESP. “The commitment to save can fit into any budget.”

Anyone can pitch in — family members, friends, both in-state and out — and for whatever occasion, whether that’s a birthday, graduation, holiday or just because.

There’s no limit to how much money you can invest annually, either, but the maximum balance per account is $500,000.

You can also set up payroll direct deposit through your employer with a minimum of $15 per pay period. That’s a savvy way to establish recurring contributions as a fixed expense — so you don’t even have to think about it.

Opening an account

Getting started takes a few straightforward steps — only 15 minutes on average. Start by visiting the “Open a 529 Account Now” page on MISaves.com. You can also print your enrollment forms from the site, fill them out and mail in.

Be sure to read the Enrollment Kit Book for a boiled-down overview of how MESP works.

To set up your account, have a few things ready to make filling out the forms quicker. According to MESP, these include the following:

  • Information About You (address, birthdate, social security number)
  • Information About Your Beneficiary (birthdate, social security number)
  • Bank Information (account number, routing number)

Note that the first Social Security Number you’ll enter on the form is for the account owner (parents, grandparents, etc.), and the second is the beneficiary (your child, niece, etc.).

There are no sales charges, start-up or maintenance fees to start your MESP account.

Flexibility is key

The funds in your MESP account can ultimately be used for any eligible institution in the United States — as well as some abroad. That includes public and private colleges and universities, trade schools, graduate schools and professional schools, MESP notes.

What if your child decides not to attend college, or some of the funds go unused? You can ultimately transfer those to another eligible family member’s plan. Keep in mind that non-qualified withdrawals are subject to federal and state taxes, as well as a potential 10% federal penalty on earnings.

And, while starting earlier is ideal, investing later in the game is far from a deal breaker.

“Even if you start saving when your child is in middle or high school, having some money set aside can help reduce their need to borrow,” MESP notes.

To learn more about MESP, visit MISaves.com or call 877-861-MESP from 8 a.m. to 8 p.m. Monday-Friday.

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