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For families who plan to help their child pay for their education, saving early is essential to ensure they have enough money to cover part of the cost of education. Now, some states are encouraging parents to start saving early by giving them free money to invest for their child’s college education.
Most states require parents to open a 529 Savings Plan – which is a state-sponsored investment account used for education-related expenses such as tuition, room and board, supplies and books – in order to receive the free money. Some states provide a scholarship to students if parents open a 529 savings plan. Other states offer matching contributions. For example, if a parent invests $ 100, the state will provide an additional $ 100.
A 529 savings plan is the preferred investment account for the college because of its tax advantages: investments grow tax-free and withdrawals are not taxed if used for education superior. These 529 savings plans usually allow you to invest in stocks or bonds, and contrary to popular belief, they have little impact on the financial assistance your family is entitled to because they do not reduce your eligibility. using only 5.64%.
State initiatives that provide parents with grants or matching contributions for university savings accounts (CSAs) are intended to help low to moderate income children and first generation students start saving early for university.
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CSAs help parents and kids by providing real money for college, and they’re sending a message to kids that city and state believe in their potential to go to college, says Shira Markoff , project manager at Prosperity Now.
While most states provide a small amount of money to parents in these CSAs, research has shown that even a small investment can have a big impact on low to middle income children. Children with a CSA who had less than $ 500 were three times more likely to enroll in college and more than four and a half times more likely to graduate from high school than those without a CSA at all.
Other emerging research on CSAs is also promising. A Study in progress found that parents who received $ 1,000 in a CSA had higher expectations for their child to attend college and were more proactive in preparing for their child’s college education by saving more for college or looking for resources to understand financial aid, says Markoff.
Many state programs have income and age requirements for eligibility, and most states require parents to open an account before they can receive the grant money. However, some programs, like NYC Kids Rise Where Pennsylvania Keystone Researchers will automatically deposit money into an account for your child.
There are only a few states and cities that offer these CSAs, but parents might be surprised to find that they are eligible to receive anywhere from $ 50 to thousands of dollars. Below, Select examines the different states offering grants and matching contributions for CSAs and their eligibility criteria.
How much you will earn: New beneficiaries will receive up to $ 200 in matching contributions. If you set up automatic contributions of at least $ 25 per month, you will receive an additional $ 25.
Age limit: The child must be 14 years old or under by 12/31/2021
Income restriction: $ 75,000 in adjusted annual gross income
How much you will earn: The KIDS Matching Grants Program will match up to $ 600 of your contribution with a minimum contribution of $ 100. The program is limited to 1,200 participants or 300 people each of Kansas’ four congressional districts.
Age limit: Nothing
Income restriction: For low-income residents earning less than 200% of the federal poverty line.
Program: Maryland College Investment Plan
How much you will earn: Depending on your annual income, you are entitled to $ 250 or $ 500 if you make a minimum contribution (which also varies by income level) of $ 25, $ 100 or $ 250. Recipients are entitled to two state contributions per year, but these are not guaranteed.
Age limit: Nothing
Income restriction: The minimum contribution and the state contribution depend on your annual income. For joint filers your annual income must be less than $ 175,000 and for individual filers your annual income must be less than $ 112,500.
How much you will earn: You’ll get matching contributions when you open the account, set up automatic contributions, and make them annually. When you open the account and add $ 25, you get a grant of $ 100. After setting up and making six consecutive automatic contributions (must be made at least quarterly), you will receive an additional $ 100. And finally, if you make contributions every year, you’ll get a 30% matching grant of up to $ 300. For example, if you contribute $ 600 per year, you will get $ 180 and if you contribute $ 1,000, you will receive $ 300.
For children born after January 1, 2013, they can receive the Alfond scholarship – a grant of $ 500 for the college.
Age limit: Nothing
Income restriction: Nothing
Program: SSGA Upromise 529 plan
How much you will earn: Through the Silver State Matching Grant, you will earn up to $ 300 in matching grants per year for five years for a total of $ 1,500.
Age limit: Beneficiary is 13 years of age or younger on December 31 of that year
Income restriction: Household income is less than $ 74,999
How much you will earn: NYC Kids Rise will automatically give you $ 100 for opening a NYC Scholarship account. If you activate the account, you will receive $ 25. Subsequently, if you open an education savings account, you will receive an additional $ 25, and after making a deposit of $ 5 to your account, you will receive an additional $ 25. Finally, the program will correspond to contributions, paid between the first and the fifth year, up to $ 100. In total, you are eligible for $ 300 from the program.
Age limit and restrictions: Available to kindergarten children enrolled in a New York public school (and participating charter schools)
* Note: this is not available to all New York State residents
Program: College SAVE
How much you will earn: With the baby match, you will get a $ 200 match. For the Kindergarten launch game, you will get a $ 100 game. The BND match is $ 300.
Age limit: For the baby-match, your child must be less than one year old. For the Kindergarten kickoff game, your child must be under 7 years old. For the BND match, the child must be under 15 years old.
Income restriction: For the BND match for joint filers, your adjusted gross annual income must be less than $ 120,000 and for single filers, less than $ 80,000. There is no income requirement for the Kindergarten Pitching Game or the Infant Game.
Program: Oregon University Savings Plan
How much you will earn: Through the Baby graduation program, you will receive a one-time contribution of $ 25. For the Kinder Grad program, you will also receive a one-time contribution of $ 25. Through the Oregon Scholars Program, grantees will receive matching funds if they attend partner schools such as Willamette University or Linfield University.
Age limit: For the Baby Grad program, your baby must be less than one year old. For the Kinder Grad program, the child must be five or six years old.
Income restriction: Nothing
Program: University-related economizer
How much you will earn: CollegeBoundbaby offers a $ 100 grant to babies born or adopted in Rhode Island between January 1, 2015 and June 30, 2021.
Age limit: Available for children born or adopted by families in Rhode Island between January 1, 2015 and June 30, 2021. However, to receive the grant, the child must be under one year of age.
Income restriction: Nothing
Program: TNStars University Savings
How much you will earn: Through the Tennessee Investments Preparing Fellows (TIPS), you can receive $ 100 for every $ 25 you can contribute each year. Recipients can receive a match of up to $ 500 per year, so to maximize it you will need to contribute $ 125 per year. The maximum lifetime match is $ 1,500.
Age limit: Children must be 14 years of age or younger.
Income restriction: So for low-income families, it depends on your adjusted annual gross income.
If you don’t live in one of the above states, there are still other options to open a 529 counts for your child. In fact, you’re not limited to your own state’s plan, which means you can look for a 529 account that offers the lowest fees and the best investment choices. That said, you must be a resident of the state to be eligible for the above grants or matching contributions.
And remember, robo-advisers like Wealth front and Improvement also offer the possibility of opening a 529 plan for your children. Robo-advisers will create a personalized portfolio based on your investment schedule and level of risk and automatically adjust your investments based on market developments.
Editorial note: Any opinions, analysis, criticism or recommendations expressed in this article are the sole responsibility of the editorial staff of Select and have not been reviewed, endorsed or otherwise approved by any third party.