ASK KIM


Open a 529 with Little Money

Kimberly Lankford

I checked into a reputable investment firm, and the minimum to open a 529 account is $2,500. I do not have that much on hand to start the account. Can you point me in the right direction?



I want to open a 529 account to put away money for college for my son, who is 1 year old. I live in California and checked into a reputable investment firm, and the minimum to open an account is $2,500. I am a single mother and do not have that much on hand to start the account. Can you point me in the right direction?

That high minimum is unusual. In fact, one of the best things about 529 accounts is that you can get started with just a little money. Most plans have investment minimums of $15 to $250, and Utah doesn't even have a minimum investment requirement. But a few states have much higher minimums -- such as $2,500 for non-residents investing in the Kansas plan ($500 for residents) and $1,000 for Fidelity's plans in Arizona, Massachusetts and New Hampshire (or $50 if you sign up to make automatic investments).

California's ScholarShare 529 plan lets you get started with as little as $25, or $15 if you sign up to have money deducted automatically from your paycheck. If your state offers an income-tax deduction for your contributions, it's usually best to open an account with your state's plan first so you can benefit from the tax break. But only about half the states offer that deduction, and California isn't one of them.

For people without state tax breaks, we generally recommend Iowa's 529 plan, which lets you invest as little as $25 ($15 with payroll deduction) and offers several low-fee Vanguard funds as investment options. You don't need to live in Iowa to open a 529 plan there, and you can use the money at any college.

For more information about the rules for each state's plan, see our Find the Best 529 Plan map or compare tax benefits and investment minimums of the various plans. To learn about the new tax laws and financial aid rules that make 529s an even better deal, see The New Math of Paying for College.

Got a question? Ask Kim at askkim@kiplinger.com.




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