Why Families Should Start a 529 Plan

College isn’t getting any cheaper. Historically, tuition rises about 3–5% per year. Do the math based on your child’s age—it adds up fast. But a 529 Plan can help, and it’s quick and easy to start.

A 529 Plan is a tax-advantaged investment account specifically designed for education expenses. But did you know it can also be used for trade schools, apprenticeships, student loans (up to $10,000), and some K–12 tuition (up to $10,000/year)?  You can choose your investment risk level or pick a target-date option that automatically adjusts as your child approaches college age.

A 529 grows tax-free, and withdrawals are tax-free when used for qualified education expenses. If you are worried that all the funds won’t be used, you can transfer the funds to another child, and up to $35,000 can be transferred into a Roth IRA.  And anyone can contribute!  Think about how great the gift of a more affordable education would be!  In 2025, individuals can contribute up to $19,000 per year per child without triggering the gift tax. Couples can give $38,000. There’s also the option to “superfund” a plan by contributing up to five years’ worth at once ($95,000 per person or $190,000 per couple) under the gift tax limit.

It is never too late to get a 529 started!  Even just a few years of compounding can make a difference when it comes to affording college.  While a 529 plan can have a small effect on financial aid, the impact is generally minimal—especially when owned by the parent.  Even if you just do a small amount each month, that money starts making you more money!  You can have funds automatically withdrawn each month into your plan. 

And I will always say that teaching your kids how this works also gets them started with their financial literacy!  What better lessons than understanding how investing works—and the real costs of education

Next time, we’ll talk about getting your savings account in order.