Question

Danielle would like to start saving for her daughter’s college tuition. Which type of savings account should she open?

Answer 1

401k is saving for retirment  so it is 529 plan

Answer 2

Answer:

529 plan

Step-by-step explanation:

In order to determine which account should Danielle open for saving for her daughter's education, one must first identify what each option means here:

Money Market  basically refers to the dealing in short term loans. This is where one either involves in large volume trade with institutions, at wholesale level, or buys mutual funds and opens money market account in the bank, at retail level.

529 plan is where savings are done for future higher education expenses, therefore, is designed to be a tax-advantaged investment plan.

A basic savings account is a simple type of bank account for the purpose of savings by depositing money, keeping it secure and earning interest in the process. There is no specific purpose for opening such accounts and tax is deductible on the interest earned.

A 401(k) is sponsored by employer as retirement savings plan. This where savings are done for utilization at the time of retirement and taxes aren't deducted until money is withdrawn from the account.

Hence, we can conclude from the above mentioned definitions that the 529 plan will be best savings plan for Danielle to open in order to start saving for her daughter's education.