Superpower Your Savings: How the Fidelity Rewards Visa Can Fuel Your 529 Plan!
Hey everyone, Philip here from Points of Phillip, and I'm excited to share a personal journey that led me to discover a credit card "superpower" - the Fidelity Rewards Visa!
Recently, my wife and I were matched with a birth mom and are preparing to become adoptive parents! This exciting news sent me into deep research mode, figuring out the best ways to financially prepare for the future. That's when I really started digging into 529 plans and discovered a credit card that can seriously boost those college savings.
The Fidelity Rewards Visa: Your Secret Weapon
This card offers a solid 2% cash back on every single purchase with no annual fee. That's already a win! Plus, it recently got some sweet upgrades like no foreign transaction fees and even TSA PreCheck (covered in detail in another video).
But here's the real magic: you can transfer your rewards into almost any Fidelity brokerage account! That includes a cash management account, an IRA, and most importantly, a 529 plan!
Turning Everyday Spending into College Savings
Let's crunch some numbers! My wife and I spend around $5,600 a month on average. Using the Fidelity Rewards Visa, that translates to $112 in rewards each month (2% cash back). Over a year, that's $1,344! Now, imagine doing this consistently for 15 years – that's over $20,000 saved just by using this card!
Want to do more? If you set aside an additional $200 each month, you're looking at closer to $40,000 saved for college over 15 years.
Understanding the Power of a 529 Plan
So, what exactly is a 529 plan, and why is it so great?
Tax-Advantaged Growth: Earnings grow tax-deferred, meaning you don't pay taxes on gains as you buy and sell investments within the plan.
Tax-Free Withdrawals: As long as the money is used for qualified education expenses (like tuition, room, and board), withdrawals are completely federal income tax-free.
No Annual Account Fees: Fidelity's 529 plans don't have annual account fees.
Gift Tax Benefits: You can contribute up to $19,000 annually without being subject to federal gift tax, and can even frontload 5 years' worth of contributions (up to $95,000).
Flexibility: The beneficiary can be changed to another eligible family member.
Minimal Impact on Financial Aid: 529 assets are considered the parent's assets, which have a smaller impact on federal financial aid eligibility compared to a child's assets.
Potential Downsides
Of course, there's always an opportunity cost. By focusing solely on the Fidelity Rewards Visa and a 529 plan, I might miss out on travel rewards or other potentially higher cashback rates offered by other cards. For example, a strategy involving the Charles Schwab Platinum, Gold Card, and Blue Business Plus could yield more points, especially on travel and dining. However, those cards come with hefty annual fees.
The Verdict
For me, the Fidelity Rewards Visa offers a simple and effective way to boost my child's future education savings without drastically changing my spending habits. The 2% cashback, combined with the tax advantages of a 529 plan, make it a winning strategy!
What do you think? Let me know your thoughts and credit card strategies in the comments below!