The average account balance in the popular college savings plans known as 529s climbed 14 percent to a record $19,584 in 2013, according to a new report released Tuesday.
The College Savings Plan Network, a non-profit group that promotes 529 programs, also noted that total investments in 529s reached a record $227.07 billion last year, up 19 percent from 2012. In addition, the total number of 529 accounts increased 4.4 percent last year, going from 11.1 million to 11.6 million last year.
The state-sponsored 529 accounts, such as Learning Quest in Kansas and Most in Missouri, are attractive because earnings in the accounts grow tax-deferred. However, no federal income tax and generally no state income taxes are taken out as long as the funds are used to cover qualifying educational expenses, such as tuition, fees, supplies and computer equipment.
Contributions to the accounts are not deductible, however.
In a separate report released Tuesday, the College Savings Foundation said a record $4.2 billion in new contributions flowed into the savings plans in the fourth quarter. That was up 1.3 percent from 2012’s fourth quarter and up nearly 34 percent from the fourth quarter of 2011.
The average size of new accounts opened in the quarter dipped slightly to $5,374 from $5,598 in 2012, the foundation said.
“We are pleased to see a strong momentum of savings as families are becoming savvier about how to plan and fund their children’s college education,” Mary Morris, chair of the nonprofit College Savings Foundation said in a statement.