Answer:
Explanation:
A 529 plan (Qualified tuition plan) is a tax-advantaged savings plan for future education costs while a money market account refers to a investment or a deposit with a financial institution that earns interest based on the current rates.
Money market deposit accounts are better choices than 529 plan for money you might need to tap at a moment’s notice to cover an emergency or an unexpectedly large expense. They pay higher interest than ordinary savings accounts and give you immediate access to your money
While in 529 savings plan, If you don’t use the money invested for college tuition, you will be penalized 10 percent when you withdraw the money to use it for something else. In addition, both your state and the federal government will tax the earnings on your account in your current tax bracket.
The basic advantage of 529 plan over money market account is the tax-advantage that is the amount invested or withdrawn is tax free. It also has high return and funds from it can be used for another beneficiary who is a qualified family member. Whereas the disadvantage is that the 529 plan is a specified fund for future education purposes. This makes it restricted as the fund can not be transferred for a different use. Unlike the money market account whose use is not restricted. It can be withdrawn to meet diverse financial needs including education. More so, funds in the money market account are insured and can be easily accessed.
In essence, the 529 plan is a specific investment while a money market account is more general in nature.