Colorado has added a Federal Deposit Insurance Corp.-insured bank product to its section 529 college-savings plan, joining the trend toward more conservative products.
The state Tuesday launched the CollegeInvest Smart Choice College Savings Plan, which offers a certificate of deposit, insured by the FDIC, and a money market account through FirstBank Holding Co. in Lakewood, Colo. Several other states have similar products. "Families in Colorado were looking for a more conservative option," said Angela Baier, a spokeswoman for CollegeInvest. The plan offers rates from 0.40% to 1%, depending on the size of the balance.
A 529 plan is an education savings plan operated by a state or educational institution designed to help families set aside funds for future college costs. It is named after Section 529 of the Internal Revenue Code, which created these types of savings plans in 1996.
Several 529 plans have added bank products in recent years as a way to encourage investors who were not comfortable with equities to save through 529 plans, which can be used to pay for the costs of higher education free of federal income tax. Many states also offer state tax benefits to residents.