How to Save for Your Child’s College Education with a 529 Plan


Many parents want to help their children pay for college, but they may not know how much to save or where to invest. One of the most popular options is a 529 plan, which is a tax-advantaged account that can be used for qualified education expenses. But how much should you contribute to a 529 plan, and when should you start?

What is a 529 plan?

A 529 plan is a type of investment account that allows you to save money for your child’s education and enjoy tax benefits. There are two main types of 529 plans: savings plans and prepaid tuition plans.

  • A 529 savings plan works like a regular investment account, where you can choose from a variety of funds and portfolios. The money in the account grows tax-free, and you can withdraw it tax-free as long as you use it for eligible education expenses, such as tuition, fees, books, supplies, and room and board. You can use a 529 savings plan at any accredited college or university in the U.S. or abroad, and even at some K-12 schools.
  • A 529 prepaid tuition plan allows you to lock in the current cost of tuition at a specific public college or university in your state. You pay a fixed amount upfront or in installments, and the plan guarantees to cover the tuition and fees at that school when your child enrolls. However, if your child decides to attend a different school, you may not get the full value of your plan.

How much should you save in a 529 plan?

How to Save for Your Child’s College Education with a 529 Plan
How to Save for Your Child’s College Education with a 529 Plan

The amount you should save in a 529 plan depends on several factors, such as:

  • The cost of college in the future
  • The expected financial aid and scholarships
  • The number of children you have
  • The age of your children
  • Your income and budget
  • Your risk tolerance and investment strategy

One way to estimate how much you need to save is to use a college savings calculator, such as this one. You can enter some basic information, such as your child’s age, the type of school they want to attend, the current cost of tuition, and the expected inflation rate. The calculator will then show you how much you need to save each month or year to reach your goal.

However, you should also consider your own financial situation and priorities. Saving for college is important, but it should not come at the expense of your own retirement or emergency fund. You should also be realistic about how much you can afford to save and invest without compromising your lifestyle or taking on too much debt.

When should you start saving in a 529 plan?

The sooner you start saving in a 529 plan, the better. The longer you save, the more time your money has to grow and compound. You also benefit from the power of dollar-cost averaging, which means that you buy more shares when the prices are low and fewer shares when the prices are high. This reduces your average cost per share and smooths out the market fluctuations.

Ideally, you should start saving in a 529 plan as soon as your child is born or even before. Some parents open a 529 plan in their own name before they have children and then transfer it to their child when they are born. This way, they can take advantage of the tax benefits and the early start.

However, if you haven’t started saving yet, don’t worry. It’s never too late to start saving for college. Even if your child is already in high school, you can still benefit from a 529 plan. You can save money on taxes and avoid paying interest on student loans. You can also ask your relatives and friends to contribute to your child’s 529 plan as a gift for birthdays or holidays.

How to choose a 529 plan?

There are many 529 plans available in the market, and each one has its own features, fees, investment options, and performance. You can choose any 529 plan from any state, regardless of where you live or where your child goes to school. However, some states offer additional tax benefits or incentives for residents who use their own state’s plan.

To choose a 529 plan that suits your needs and goals, you should compare different plans based on:

  • The tax benefits: Some states offer state income tax deductions or credits for contributions to their own or any 529 plan. Some states also exempt earnings from state income tax when used for qualified expenses. You should check the tax rules of your state and the state of the plan before investing.
  • The fees: Most 529 plans charge annual fees for administration and management of the funds. These fees can vary widely depending on the type of plan and the investment option. You should look for low-cost plans that do not eat into your returns.
  • The investment options: Most 529 plans offer a range of investment options, such as age-based portfolios, static portfolios, or individual funds. You should choose an option that matches your risk tolerance and time horizon. You should also review the performance and ratings of the funds and portfolios.
  • The flexibility: Some 529 plans are more flexible than others in terms of changing beneficiaries, investment options, or withdrawal rules. You should look for a plan that allows you to make adjustments as your situation or goals change.

You can use online tools, such as this one, to compare different 529 plans and find the best one for you.


Saving for college is a smart and generous way to help your child achieve their dreams. A 529 plan is a great tool to save money and enjoy tax benefits. However, you should also consider your own financial situation and goals, and choose a plan that fits your needs and budget. The sooner you start saving, the better off you and your child will be.


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