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Building Block 2: Open Your Own College Savings Account

This content is only relevant to District 30 families already enrolled in the NYC Kids RISE Save for College Program.

If you are a NEW eligible participant, please note that this fall your school will communicate with you about enrollment in the program. You can then check back here starting in January to take the foundational steps in the program, outlined below. In the meantime, read about the Save for College Program, and you can download introductory materials here.

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Opening and Connecting Your Own College Savings Account

Now that your child has received their NYC Scholarship Account, and you have activated it online, it is time to take the next step.

NYC Kids RISE manages your child’s scholarship account (including contributions through Community Scholarships), and only NYC Kids RISE can put money into that account. To start saving your own money for your child’s future and earn additional rewards from NYC Kids RISE, you will need to open your own college savings account.

Open and connect your own college savings account now and your child will receive an extra $25 from NYC Kids RISE into their account!

Ready to open an account? Visit the Building Block 2 section of our downloadable resources page for instructions on how to open and connect each of these college savings accounts.

Want more information about these college savings account options? Keep reading below.

There are many ways to save for college and many kinds of college savings accounts.

To learn more about college savings account options in general, click here.

The Save for College Program allows you to connect one of two kinds of accounts to your child’s scholarship account to receive the $25 Building Block #2 reward:

1

NY’s 529 College Savings Program Direct Plan Account

(A type of investment account specifically created to help families save for college and career training)

2

Amalgamated Save for College Bank Account

(A savings account at a bank, which allows families to save safely at an insured financial institution.)

Every family’s financial circumstances are different.
Learn more about 529 accounts and bank savings accounts in general by reading below, and consider your own circumstances before opening an account.

To compare the two college savings account options available to you through the Save for College Program and make the best decision for your family, visit the Building Block 2 section of our downloadable resources page and read the Choose the Right Account Tool.

College savings 101:
529 accounts vs. bank accounts

As you explore these college savings account options, we encourage you to become familiar with two main kinds of accounts: a 529 account and a bank account.

Read below for answers to common questions you may have about these two types of accounts.

This information applies to the accounts you can link to your child’s scholarship account. It also applies to other 529 plans and bank accounts that you may find on your own.

1. What is it?

529 ACCOUNT

  • A 529 account is a type of investment account created to help families save for college and career training.
  • The NYC Scholarship Accounts are invested in a 529 account.
  • Money in a 529 account can grow over time, but it can also lose value.
  • Money in this account grows tax-free, and earnings are tax-free upon withdrawal if used for qualified higher education expenses.
  • Many states also have state tax deductions or credits for deposits to 529 accounts.

BANK SAVINGS ACCOUNT

  • A savings account at a bank allows families to save safely at an insured financial institution.
  • Interest can be earned on the money deposited into this account. The interest is taxable.
  • Deposits in this savings account are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000.
    • The standard deposit insurance coverage limit is $250,000 per depositor, per FDIC-insured bank, per ownership category. Deposits held in different ownership categories are separately insured, up to at least $250,000, even if held at the same bank.
2. How can I use the savings in the account?

529 ACCOUNT

  • Savings can be used for “qualified higher education expenses” at Eligible Educational Institutions.
  • These expenses include tuition, fees, books, supplies, and equipment required for enrollment or attendance; certain room and board expenses; and certain expenses for students with special needs. (This includes adaptive equipment such as modified computers or textbooks.)
  • Money in this account can be used at most U.S. colleges, universities, graduate schools, and career training programs, and some international ones as well. (In addition, because of recent tax law changes, up to $10,000 per year can be withdrawn from 529 accounts to pay for a child’s elementary or secondary school (K-12) tuition.)
  • A current list of Eligible Educational Institutions can be found at https://fafsa.ed.gov/FAFSA/app/schoolSearch.

BANK SAVINGS ACCOUNT

  • The intent of this kind of account is for a child’s college education and not for other purposes.
  • However, there are no official restrictions on how savings in this account can be used.
3. What if I need the money for an expense not related to my child’s education? For example, what if my child does not go to college?

529 ACCOUNT

  • You can remove your savings from the account for any reason.
  • But, if that money is used for anything other than qualified higher education expenses, the earnings portion of the withdrawal may be taxed as ordinary income and families may incur a 10 percent tax penalty on the earnings.
    • For example, if the account is worth $320, of which $20 is interest earned, only the interest earned ($20) would be subject to federal and state tax (rates vary by individual) and a 10% federal penalty (which would be $2).
  • 529 policies vary state by state.
  • For example, in some states a withdrawal not used for qualified higher education expenses or a change from one state’s 529 plan to another state’s 529 plan could result in tax or other consequences.
  • You can check the specific 529 plan’s website for information.

BANK SAVINGS ACCOUNT

  • You can withdraw money from this account for any reason without paying a fee or penalty.
4. What are the tax benefits of this account?

529 ACCOUNT

  • Money in the account grows state and federal tax-deferred, meaning earnings do not count toward your taxable income.
  • Many states have state tax deductions or credits for contributions to 529 plans.
    • State tax deductions may be subject to recapture in certain circumstances such as rollovers to another state’s 529 plan or nonqualified withdrawals.

BANK SAVINGS ACCOUNT

  • None.
5. How can I open this kind of account?

529 ACCOUNT

  • Check the specific 529 plan’s website for information about how to open an account.

BANK SAVINGS ACCOUNT

  • Contact the specific bank for information about how to open an account.
6. Can I transfer the money to a different child if my child decides not to go to college?

529 ACCOUNT

  • Yes, you can usually change the beneficiary on this account to a “member of the family” of the beneficiary, which includes:
    • A son, daughter, stepson or stepdaughter, or a descendant;
    • A brother, sister, stepbrother, or stepsister;
    • The father or mother, or an ancestor of either;
    • A stepfather or stepmother;
    • A son or daughter of a brother or sister;
    • A brother or sister of the father or mother;
    • A son-in-law, daughter-in-law, father-in-law, mother-in- law, brother-in-law, or sister-in-law;
    • The spouse of the beneficiary or the spouse of any individual described above; or
    • A first cousin of the beneficiary.

BANK SAVINGS ACCOUNT

  • As the owner of this type of account, you may use the money for any child or purpose.

 

7. Could saving in this account affect my child’s eligibility for federal and state financial aid (according to current financial aid rules, which may change over time)?

529 ACCOUNT

  • Yes, possibly.
  • If your household income is less than $50,000, savings in this account will usually not affect your child’s eligibility for federal financial aid.
  • If your household income is greater than $50,000, only a small part of the savings in this account will be counted for federal financial aid eligibility.
  • These answers may change in future years. For more detailed information on this question, visit our downloadable resources page for a handout on how the Save for College Program may affect future financial aid.

BANK SAVINGS ACCOUNT

  • Yes, possibly.
  • If your household income is less than $50,000, savings in this account will usually not affect your child’s eligibility for federal financial aid.
  • If your household income is greater than $50,000, only a small part of the savings in this account will be counted for federal financial aid eligibility.
  • These answers may change in future years. For more detailed information on this question, visit our downloadable resources page for a handout on how the Save for College Program may affect future financial aid.
8. Could my eligibility for public benefits be affected by saving money in this type of account?

529 ACCOUNT

  • Yes, possibly.
  • Visit our downloadable resources page for a handout on how the Save for College Program may affect your public benefits.
  • For more support, contact us.

BANK SAVINGS ACCOUNT

  • Yes, possibly.
  • Visit our downloadable resources page for a handout on how the Save for College Program may affect your public benefits.
  • For more support, contact us.
9. Are there any fees or penalties to remove my money from the account?

529 ACCOUNT

  • Check the 529 plan’s disclosure materials for information on any fees if you use your savings for higher education.
  • If the money is not used for higher education, you could pay federal, state and local income tax plus a 10% federal penalty tax, but only on the interest earned (not on all the savings in your account).
  • You also may need to repay the value of state tax deductions previously taken.

BANK SAVINGS ACCOUNT

  • Contact the bank for information about any applicable fees to withdraw from your savings.
10. How safe is the money held in this account?

529 ACCOUNT

  • Money you invest could end up growing over time, but you could also lose money based on the economy and financial markets.

BANK SAVINGS ACCOUNT

  • Bank savings of up to $250,000 per depositor are protected against loss by the Federal Deposit Insurance Corporation (FDIC).
11. Are account assets protected from creditors?

529 ACCOUNT

  • Possibly. If 529 deposits were made at least 720 days before a federal bankruptcy filing, they are fully protected and not available to creditors.
    • As long as beneficiary on account is a child, stepchild, grandchild or step grandchild of the account owner who is filing for bankruptcy. Note: a legally adopted child or a foster child is treated as a child by blood.
  • If 529 deposits were made between 365 days and 720 days
    before a federal bankruptcy filing, up to $6,225 (adjusted
    for inflation) is excluded from bankruptcy estate and not available to creditors.

    • As long as beneficiary on account is a child, stepchild, grandchild or step grandchild of the account owner who is filing for bankruptcy. Note: a legally adopted child or a foster child is treated as a child by blood.
  • If deposits were made less than 365 days prior to a federal
    bankruptcy filing, they are considered part of bankruptcy estate and are not protected from creditors.
  • In addition to federal bankruptcy protection, some states also provide partial protection from creditor claims for 529 deposits.

BANK SAVINGS ACCOUNT

  • No.
12. What else should I know before opening an account?

529 ACCOUNT

  • Carefully read and understand the materials provided by the
    529 plan, including disclosure documents, before signing up for this account.

BANK SAVINGS ACCOUNT

  • Carefully read and understand the materials provided by the bank before signing up for this account.

Additional tools and resources

Attend a Save for College Program Event: For a schedule of upcoming events online or at your child’s school, visit the Events page or call 833-KID-RISE (833-543-7473).

  • 1

    This account is held in your name, and it is meant to be used for your child’s education. You, your family, and your friends can deposit money into this account.

  • 2

    Visit an NYC Financial Empowerment Center: Schedule a free, confidential, one-on-one appointment with a professional financial counselor who can help you understand your account options and make a plan to start saving. Schedule an appointment online at nyc.gov/dca or by calling 311.

  • 3

    Contact NY 529: For detailed information about NY 529 Direct Plan accounts, visit nysaves.org or call 877-NYSAVES (877-697-2837).

  • 4

    Contact Amalgamated Bank: For detailed information about Amalgamated Save for College Bank Accounts, visit an Amalgamated branch near you or call 800-662-0860. To find an Amalgamated branch,
    visit amalgamatedbank.com/find-branchatm.

Ready to Move onto the Next Step?

Finished setting up your savings account? Click below to move to the next step in your Save for College Program journey.

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