The Importance of 529 Plans:
Investing in Your Child’s Future

The Importance of 529 Plans:
Investing in Your Child’s Future

by Briley Edwards – Financial Advisor

Saving for college can feel overwhelming, especially with tuition costs rising every year. But there’s a powerful tool designed specifically to make it easier. It’s the 529 plan.

Whether your child is still in diapers or already in high school, it’s never too early (or too late) to start thinking about how a 529 plan can help fund their education.

What is a 529 plan?

A 529 plan is a tax-advantaged savings plan designed to encourage families to save for future education expenses. These plans are sponsored by states, state agencies, or educational institutions and are named after Section 529 of the Internal Revenue Code.

There are two types of 529 plans:

1. College savings plans – Work much like a Roth IRA or investment account. Your contributions are invested in mutual funds or similar products, and your account grows tax-free.
2. Prepaid tuition plans – Allow you to lock in current tuition rates at participating colleges and universities for future use.

The Tax Advantages

One of the biggest benefits of a 529 plan is tax efficiency:

• Earnings grow tax-free, meaning you won’t pay federal income tax on investment gains.
• Withdrawals are tax-free when used for qualified education expenses — including tuition, room and board, books, and even K–12 tuition¹ (up to $10,000 per year).
• Unlock state tax benefits as many states offer tax deductions or credits for contributions to a 529 plan.

Flexibility for Changing Goals

529 plans are more flexible than many people realize. If your child decides not to go to college, you can:

• Transfer the funds to another qualifying family member (like a sibling or even yourself).
• Use up to $10,000 to repay student loans.
• Starting in 2024, you can roll over unused funds into a Roth IRA for the beneficiary, giving them a head start on retirement savings (subject to certain limits).

The Power of Time and Compounding

The earlier you start contributing, the more your money can grow through the power of compound interest. Even small, regular contributions can add up significantly over 10–15 years. For example, investing just $100 a month from birth could grow to more than $30,000 by college time — assuming a modest 6% annual return.

Making College More Affordable

Every dollar saved in a 529 plan is one less dollar you or your child will need to borrow later. By planning ahead, you can reduce future student loan debt and make higher education a more affordable and less stressful experience for your family.

The Bottom Line

A 529 plan isn’t just a college savings account — it’s an investment in your child’s opportunities and independence. With tax advantages, flexibility, and long-term growth potential, it’s one of the smartest and most accessible tools families can use to prepare for the future.

Ready to Create Your College Savings Strategy?

Every family’s financial situation and educational goals are different. A financial advisor can help you evaluate your state’s 529 options, understand the tax benefits, and build a plan that aligns with your long-term objectives.

Take the first step toward saving for college and schedule a consultation to discuss how a 529 plan can fit into your overall financial strategy.

¹Starting in 2026 withdrawals for primary and secondary tuition can be tax-free up to $20,000.

Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.

Investors should consider, before investing, whether the investor’s or the designated beneficiary’s home state offers any tax or other benefits that are only available for investment in such state’s 529 savings plan. Such benefits include financial aid, scholarship funds, and protection from creditors.

As with other investments, there are generally fees and expenses associated with participation in a 529 plan. There is also a risk that these plans may lose money or not perform well enough to cover education costs as anticipated. Most states offer their own 529 programs, which may provide advantages and benefits exclusively for their residents. The tax implications can vary significantly from state to state.

Briley Edwards