INDIANAPOLIS — Parenting is a cool experience for Martina Gaughan.
"You just get to watch like a little person form into a new human," she said.
And decision making for that human can sometimes feel like a group effort.
"Grandparents have opinions, neighbors have opinions, friends have opinions," Gaughan said.
What many of do them agree on? Saving money for education using a 529 account.
It's a tax-friendly savings plan and investment tool for college, trade school and certain education-related expenses.
Right now, Gaughan's 15-year-old daughter is thinking about physical therapy and her 12-year-old son wants to be a soccer star.
"He's like, 'I'm not even going to need college money.' And I'm like, 'Well, that's great. But just in case, let's think about some other things,'" Gaughan laughed.
Those "other things" are where the 529 account comes into play.
How they work
You pay taxes on the money going into the account.
But you do not pay taxes on the growth, nor when the money comes out, as long as it's a qualified expense.
Ted Rossman with Bankrate.com said the money can go toward more than just tuition.
"It's also room, board, books," Rossman said, "you can even withdraw some of this money for K-12 expenses."
He said when it comes to the different account holders, compare the fees.
"One [fee] is the account management fee. The other one is the individual investments that you're picking," Rossman said.
Gaughan and her husband's accounts, for example, are an Indiana CollegeChoice plan. When account holders contribute to the state plans, they can also get a 20% tax credit for contributions up to $1,000.
Marissa Rowe with the Indiana Education Savings authority said the account minimum is just $10.
"Friends and family can contribute, they can also claim the credit." Rowe said.
The top question: "What if my kid doesn't go to college or a trade school?"
"You can leave the money account for a later date, there's no timeframe," Rowe said. "Another option is you can change a beneficiary on the account to another member of the family."
That's just in case Gaughan's son wants to share his portion with his sister when he's a soccer star.
Rowe added that beneficiaries can go out as far as a first cousin and that steps count.
If the money does not go toward a qualified expense, taxes must be paid on the earnings plus a 10% penalty. State tax credits must also be recaptured.
Will the savings hurt our financial aid?
For a parent-owned 529, Rowe said the most it will count on the FAFSA is 5.64%. That means that if you have $10,000 saved for education, they only record $564 at the very most.
She adds that this is the only vehicle with this type of treatment.