MNSAVES: The Minnesota Way to Save for College

As a mom of two teens, I think a lot about what college will look like for them—and for so many families right now, one word comes to mind: expensive.

When I went to college, I had no savings and paid my own way through school. I started at a community college to save money, transferred to a university, and eventually earned two degrees. It took seven years and a lot of hard work, and I graduated with loan debt that was a lot of work to pay off.

Now that my kids are getting ready to take their own next steps, I’m reminded just how important it is to plan ahead for education costs—whether that means college, a trade program, or something in between. Every family’s situation is different, but one thing is the same for all of us: the earlier you start preparing, the better.

That’s why I want to share information about MNSAVES, Minnesota’s 529 College Savings Plan, which helps families save for future education expenses in a flexible, tax-advantaged way.

Planning for 21st-Century Education

With kids settled back into their school routine, it’s the perfect time for parents to think about planning for their children’s future education, and that doesn’t necessarily mean a 4-year college. There seems to be a shift happening in how we define education in the 21st Century. It’s not just college diplomas, but also apprenticeships, industry credentials, online courses, and vocational training — all of which can equip our kids with skills needed for today’s job market.

Regardless of your child’s future educational path, it makes sense to start early to prepare. That’s where the MNSAVES 529 college savings plan can help. Here are some common questions about MNSAVES.

What is MNSAVES?

MNSAVES is Minnesota’s 529 college savings program. A 529 plan is a tax-advantaged investment account designed to help families save for future education expenses. Think of it as a Roth IRA, but instead of saving for retirement, you’re saving for future college costs. MNSAVES is specifically designed to help people save, invest, and pay for future education costs.

Why are 529s in the news?

You may have heard in the news recently that there were some federal changes to 529 college savings plans passed over the summer. It’s true, and the new rules apply to MNSAVES. Here’s an important highlight from the bill – expenses associated with obtaining and maintaining a postsecondary credential (an occupational or professional license, for example) are now included. This includes the cost of tuition, books, supplies and equipment needed to maintain a certification or license (e.g., electricians, health care workers, skilled trades, etc.)¹.

Are there tax advantages to investing with MNSAVES?

Yes, that’s the best part. If you are planning to save for education, why not choose an account that offers you triple tax benefits:

1. Your contributions grow tax-deferred over the years you are saving.
2. Withdrawals are 100% tax-free when used for qualified expenses.
3. State tax deduction on contributions up to $3,000 per year for joint filers and $1,500 for single filers.

Can family and friends contribute to an account?

Yes, you don’t have to go it alone! One key feature of MNSAVES is the ability for family and friends to easily make gift contributions to a child’s MNSAVES account for birthdays, holidays, or accomplishments like good grades or graduations. The account owner simply shares a unique Ugfit® code, allowing gifters to contribute directly to the MNSAVES account at Ugift529.com. If the person making that gift is a Minnesota taxpayer, their contributions are also tax-deductible, because the Minnesota state income tax deduction for contributions made to an MNSAVES plan is available to any Minnesota taxpayer, not just the 529 plan account owner, making gifting to an MNSAVES account beneficial for all.

Where can MNSAVES be used?

It’s a common misconception that a state’s college savings fund needs to be used in-state. That is actually not true, the funds you save in a MNSAVES account can be used at in-state and out-of-state at schools across the country and even some abroad. Funds can be applied to a traditional four-year degree, technical degree, trade program, or a registered apprenticeship.

When should I start saving for my kids’ college education?

The sooner you invest, the more time your money has to grow, thanks to the power of compounding interest. However, it’s never too late to invest. Any money you set aside will benefit your future student. Every dollar saved may be one less dollar you or your student may need to borrow to achieve their educational goals.

October: A Great Time to Focus on College and Savings

This month, Minnesota families have an extra reason to think about higher education costs. In Minnesota, October is College Knowledge Month, when many colleges across the state waive their application fees. It’s an ideal opportunity for students to explore their options—and for parents to think about how to make those future plans more affordable!

Saving money on applications is a great first step – setting aside even small amounts now in a 529 plan is the next. Together, those efforts can make a real difference when it comes to paying for college or career training down the road.

How do I get started with MNSAVES?

It takes about 15 minutes to open an account, and you can start with as little as $25. Many people set up recurring contributions or a payroll deduction to stay on track with their college savings goals. Go to mnsaves.org and click on the green button in the top right corner of the home page. Follow the prompts to open an account online or call 877-338-4646 to talk with a customer service representative.

Today, the pathways to education are more diverse than ever, and parents need flexible tools to support those options along the way. MNSAVES is an ideal, tax-advantaged way to save for future education expenses. To learn more, visit mnsaves.org.

¹Withdrawals for recognized postsecondary credentialing—including tuition, books, equipment, supplies, as well as testing fees for continuing education and therapies for students with disabilities—are exempt from federal income tax. For Minnesota taxpayers these withdrawals are subject to recapture of Minnesota state income tax on the earnings and Minnesota’s recapture provisions for previously deducted or credited contribution amounts. Consult a tax professional for guidance.

To learn more about the Minnesota College Savings Plan, its investment objectives, risks, charges and expenses see the Plan Description at mnsaves.org before investing. Read it carefully. Investments in the Plan are neither insured nor guaranteed and there is the risk of investment loss. If the funds aren’t used for qualified higher education expenses, a federal 10% penalty tax on earnings (as well as federal and state income taxes) may apply. TIAA-CREF Individual & Institutional Services, LLC, Member FINRA, distributor for the Minnesota College Savings Plan.

(Disclosure: This post was created in partnership with Minnesota College Savings Plan. All opinions are 100% mine.)