Maximizing 529 Funds for College Savings

529 funds for college, especially with state match, are part of step seven or eight in financial order of operations.

### Maximizing 529 Plan Benefits Within the Financial Order of Operations
* 💸  529 plans are typically used to save for **future education expenses, such as college**.
* 💰  While free money going into a 529 plan is advantageous, it should not be equated with contributions to retirement accounts, which are **crucial for achieving Financial Independence**.
* 💡  Free money in the form of a **dollar-for-dollar match on 529 funds up to $500 per year** for the **first 5 years of a child's life** is a **valuable opportunity**.
* 🎓  Placing 529 contributions within the financial order of operations, which prioritizes **saving and investing for various financial goals**, is essential.
* 🪶 " Make sure you got your oxygen mask on first, meaning you're **saving for your own retirement**.
* 📈  Aim to **save and invest 20 to 25% of your gross income** as soon as possible, and then focus on **maximizing 529 plan contributions**.
* 👶  529 plans can play a significant role in **prepaying future education expenses or abundance goals for children**, and taking advantage of such opportunities can be **highly beneficial**.

[Music] all right Kyle's question is up next. It says the state of Colorado offers a dollar-for-dollar match on 529 funds up to $500 per year for the first 5 years of your child's life. So where would that fall in the financial order of operations? Oh, this is a trick question. Yeah, so maybe you can talk about where 529 typically falls and then share some thoughts about how you would think about that. Yeah, so when you put money into a 529, what's that money actually set aside for? That money is set aside for college, right? Like it's for education. I guess technically it could be for private school K through 12, but the idea is it's going to pay for an expense for someone else that you think you might likely be on the hook for at some point in time. Now we love free money and we think that free money is amazing, but I'm going to this is my stance. I want to see you agree with this, Brian. Free money going into a 529 is not

the same as free money going into your retirement account because those are not dollars. They're going to pay for your future Financial Independence. They're just kind of juicing the pot to help you pay for a future expense that you're going to incur when your child goes off to college. So in my mind, I think that would still fall into the same place that 529s normally fall. It's like a step seven, step eight type thing. But when there's that free money on the T, I would try to get there as quickly as possible because I don't think it has to be either or. I'd love to see a scenario where you're doing both so that you're still getting that free money. Kyle, I love the mentality there. That's a financial mutant mindset for sure when you hear the opportunity to get some free money. Your ears immediately perk up. But we do need to make sure that you get things in the right order of operation. There are no retirement loans. There are student loans. But I also understand a financial mutant doesn't want their

children paying student loan interest, especially if you came through that yourself. You're like, how do I not put that burden on my children? But let's make sure we also get you to step eight. There's a reason when you go to money.com resources and download your own free copy of the financial order of operations, we put the cap on there from graduation. Because we know when we're prepaying future expenses or abundance goals, as I like to call them, this is something that makes a lot of sense to make sure you got your oxygen mask on first, meaning you're saving for your own retirement. And then we're transitioning and focusing on getting those free dollars for your kids' college. So try to get to saving and investing 20 to 25% of your gross income ASAP. So then we can go and maximize those 529 opportunities. They are awesome. I will tell you, having a daughter in college right now, I have been leaning heavily on the part of her tuition that's not paid by scholarships.

we've been funding her housing and her education off of those 29s, and it's been very, very helpful. So, I commend you for the thought, but let's make sure we do it in the right order of operations. And the foo is your friend, so respect the F, respect the G, respect the got so excited, the mouth didn't want to work, respect the food, there it is. Boom, there it is.

Where Does a 529 Fall in the Financial Order of Operations?

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The Significance of 529 Funds in Financial Planning

The state of Colorado offers a dollar-for-dollar match on 529 funds up to $500 per year for the first 5 years of a child's life, providing free money for future education expenses.

529 funds are specifically designated for covering future education costs, making them different from retirement accounts.

Despite this, it is still important to prioritize 529 funds in the overall financial planning process, taking advantage of the free money opportunity while also considering other financial goals.

Prioritizing Retirement Savings Over Children's College Funds

It's important to focus on saving for your own retirement before putting money into your children's college funds.

The goal is to save and invest 20 to 25% of your gross income as soon as possible, and then take advantage of 529 opportunities for college savings.

This approach allows for prepaying future expenses while ensuring financial stability for retirement.

The Importance of Proper Financial Planning for Education

Funding education and housing is commendable, but it's important to follow the right order of operations in financial planning.

It's crucial to prioritize the basics like food (F), then education (G), and housing (29s) to ensure a sustainable approach.

Respecting the sequence of financial priorities is key to effectively supporting a friend's education and living expenses.