529 College Saving Strategies: The Best Future for Your Child

The transition between diapers to diploma seems a long way off from day one when you set your eyes on your baby at the hospital. The biggest worry for every parent is to provide necessities and education for your kids. You don’t have to cut down your priorities to save for college. We are here to help you start saving in advance to keep you and your child from taking a loan to facilitate their education. We offer the following options, and we will explain how they work:

    • Savings accounts
    • 529 plans
    • Coverdell Education Savings Accounts
    • Roth IRAs
    • Trusts
    • Savings bonds and CDs

You need a plan to establish a college fund for your child. That can be a challenge. You are going to spend $90,000 annually on in-state residents at public universities and $31,000 yearly in private universities, according to the College Board.

The number grows when you multiply that amount by six years as required by the U.S. Department of Education. All that amount is not inclusive of food, transport, and housing. If you don’t take a student loan, your child would have to work part-time or try to get a scholarship or grants.

How much do you need to save?

piggy bank

Calculate the whole amount and break it into monthly savings. Let’s say you project $50,000 annually. Before the kid turns 18, saving $500 monthly plus interest be helpful. However, it is difficult to maintain such a solid plan for 18 years. Consider the following strategies to help you meet your goals:

What you need to know about 529 plans:

  • Anyone can open this plan
  • Your account is open to contributions from friends and family
  • No income limits to fund the 529 plan
  • Withdrawals can be used for qualified educational expenses like K-12 educational expenses.
  • 529 plan account has a higher contribution limit than other types of educational accounts and is more flexible.
  • You can contribute up to $300,000 per beneficiary
  • You can jump-start your child’s account by depositing up to $75,000 in your first year without paying gift tax.

529 college savings and prepaid plans


You either choose the investment savings account or prepaid tuition plan. The 529 savings account will allow you to invest in exchange-traded funds or mutual funds. The tuition plan will lock your tuition costs to lower the impact of the ever-increasing fees.

529 savings plan

With this account, you can set aside after-tax contributions that grow tax-free. You enjoy higher contribution limits than IRAs. Proceeds can be used for tuition, books, qualified educational expenses, etc.

If you use it for general living expenses, you can get a 10% penalty. 

Before choosing the 529 plans, consider checking your home state plan first. Many states offer tax breaks and credits to residents and sometimes help in funding. You can spend on any college for qualified education expenses. 

You buy the 529 plans directly from the state’s college savings site at reduced fees. You don’t have to work with a broker. Choose age-based prefab investment plans to help you adjust the investment mix to align with the child’s age.

529 prepaid tuition plans

The tuition fee for colleges increases at 5% annually from the analytics of the College Board. Lock your tuition costs by using a 529 prepaid tuition plan. To avoid future tuition hikes, pay all or part of the required amount and participate in the university expenses. This is a good plan for you such that some universities are terminating the plan.


  • High contribution rates and no household income limits and age restrictions. Some states allow up to $ 300,000-lifetime contributions.
  • Tax-free growth.
  • The account is flexible to changes in the future.
  • If the parent is the account holder, the account is considered a parental asset.


  • Money is strictly for educational purposes. The cash will be unavailable if the child gets a scholarship unless transferred to a family member or pay a 10% penalty on assets growth.
  • The stock market can drop, risking the amount invested. Ensure you eye-out to not to lose it all.

Other choices


Other than the popular 529 plan, there are other plans, and they come with their benefits and shortcomings.

Savings accounts

According to Sallie Mae, almost two-thirds of Americans save money for their children in savings accounts or checking accounts. They earn interest but have limited flexibility. Funds can be used for non-college expenses, which can deplete the fund quickly.


  • Is a flexible investment


  • Low rate of inflation, low returns, and tax benefits.


Choose the tax-advantaged Roth IRA, which is a combination of educational savings and retirement account that is much flexible. You gain maximum growth potential as your after-tax contributions grow free from tax. You can also invest in stocks, bonds, and exchange-traded funds of your choice. Withdrawals from Roth are penalty-free for all qualified educational expenses.


  • You can keep your savings in retirement investment if your child scores a scholarship.


  • Limited contribution amounts annually. 
  • There are income restrictions
  • If you tap your account for qualified educational expenses, you might never get to track your retirement savings goals.

Coverdell education savings account

With Education Savings Accounts (ESAs), qualified withdrawals are tax-free. It is like a 529 with training wheels. In Coverdell accounts, qualified expenses include educational expenses in your child’s entire life i.e., from K-12 to grad school. ESAs are not flexible like 529 plans


  • Offer a variety of available investments.
  • Tax-free growth


  • All assets must be disbursed to the beneficiary by the time they turn 30.


Certificates of deposit (CDs) have fallen out of favor resulting from low-interest rates currently. They are, however, still a good option for savings as they offer flexibility in terms of cash flow. The portfolio never matures at once in the future.

Series EEE and I lift education tax, and it can be used for higher education expenses. See more details on their restrictions from TreasuryDirect


  • Flexible to invest


  • Very low, or no tax benefits and low returns


Before the introduction of ESAs and 529s, people used UTMAs and UGMAs trust accounts to transfer assets to the account of the child and invested until they become of age. Once they become adults, they have the freedom to spend their proceeds as they wish. The control of all assets is handed to the student.


  • Tax advantages to the donor
  • Flexible on how to spend from the account


  • The beneficiary cannot be changed
  • Can use the account for more than college expenses

Saving for college can mean combining various strategies

The 529 has proven to be the fairest way of saving for college. However, you might need to use several combinations to achieve your savings goals. When making a choice, consider long-term objectives, the number of potential beneficiaries, and your tax and income situation. Choose the 529 plan, Roth IRA, ESA, or UTMA.

Top ways to maximize 529 plan benefits


There are several ways you can take advantage of what the 529 has to offer. These tips will move you closer to your college fee savings goals:

  • Don’t wait to start saving

The 529 plan comes with a tax-free compounding. The savings have great potential to grow when you start saving early. You miss out on potential earnings when you wait to start saving. 

  • Look for a plan with low fee

Use the 529 Plan Fee Study to choose a plan with low prices and expenses that won’t eat your investment returns or reduce your college savings. Vanguard and Fidelity offer low-cost investment options.

  • Set up automatic contributions

Choose a plan with an automated payroll deduction. This plan will always keep you at the top of fulfilling your goals. If automatic deductions become a problem for you, there are options to change that in your account to suit you.

  • Reinvest any state income tax benefits

In 34 states and the District of Colombia, residents enjoy either tax deductions or credit for 529 plan contributions. 

  • Use credit cards reward wisely

Use your cashback rewards on purchases to contribute to the 529 plan. Ensure you pay it in full per month to avoid interest charges. Those using the Fidelity-managed 529 plan can link their Fidelity Rewards Signature Visa Card, and their rewards will be deposited automatically.

  • Ask for gifts

Recommend your friends and family to gift you through the 529 plan. Even that small amount will grow to help pay the college fee for the child. Use the available gifting platforms to solicit contributions to your 529 plan. 

  • Increase contributions when life changes

Your family’s budget changes over time. Once you have reduced expenses on your child, you can start making more substantial deposits. You can even make a lump sum sometimes. Also, allocate inheritance money, work bonuses, windfalls, and tax refunds to your 529 plan. 

  • Hold stocks longer

Consider keeping your 529 plan towards equities for 5-10 years before you switch to an age-based portfolio. That will increase your ROI without increasing the risk. Don’t take the fixed income investment at first.

  • Do your research

Cross-check to confirm that your 529 plan is on track to help you meet your goals. Contact us to get the latest trends on the 529 plan. 


We have helped many successful patents to create smart collage savings plan. If this something you want for yourself then please call (877) 972-3262 or complete contact us form now.


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