Your questions about 529 college savings plans answered

September is National College Savings Month and there are some plans that could help you save.

529 plans, named from a section of the tax code, allow you to set aside savings for future educational expenses.

The 529 plan is different from a pre-paid tuition plan.

RELATED: College savings: 5 things to know about 529 plans

Pros of 529 Savings Plan

  • The earlier you start contributing to a 529 plan, the more your money can potentially grow.
  • The contributions grow on a tax-deferred basis and can be withdrawn tax-free if the money is used to pay for qualifying education expenses.
  • Money can be in a number of ways. It can be used for tuition or for things like laptops or internet access. It can be used for certificate programs, two-year degrees, post-graduate work or even primary education at private schools.

Cons of 529 Savings Plan

  • Having significant savings set aside could reduce your child's eligibility for need-based aid
  • Fees
  • Tied to stock market

What if my kid decides not to go to college?

If your child decides not to go to college you will not lose your money. What will happen is you will subject to a penalty for withdrawing the money for other reasons. You will also be subject to interest on the earnings that you have. You can also change the name of the beneficiary so that somebody else can spend the money.