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  • Writer's pictureJacob Vernon

How to Save for Your Child's Education With a 529 Plan

Updated: Jun 22, 2023

A Brief Summary of 529 Plans

Kids in science class learning

Are you stressed about saving for your child’s college education? Let's look at a 529 College Savings Plan and see how it can help.

College is becoming increasingly expensive, so it is paramount to start saving early. A projection from Vanguard shows that in 15 years, the average college tuition will DOUBLE. That is a scary thought, but with a 529 Plan, you may be able to achieve your college savings goals.

Projected college tuition in the next fifteen years

What is a 529 Plan, and How do they work?

Defined simply by the IRS, a 529 plan “is an investment vehicle designed to help families pay for future expenses associated with college or other qualified post-secondary training.” There are two basic types of 529 plans, prepaid tuition plans, and savings plans. A prepaid tuition plan lets a family pay for future tuition in current dollars and prices. This is a massive benefit because it removes the risk of inflation causing price increases, but it does affect your opportunity cost. A 529 savings plan enables a family to accumulate funds in a tax-advantaged way for future tuition costs. The savings plan stipulates that if funds are used for college expenses, then they can be withdrawn tax-free.* Furthermore, earnings within the account grow tax-free.

Other Important Facts about 529 Plans

  • 529 plans can only be traded twice a year, so having your investment advisor representative oversee how the funds are allocated may be beneficial.

  • Contributions are made with after-tax income, so they are not tax deductible.

  • Contributions to a 529 plan are considered gifts under federal tax law, so for the most part, you can only make contributions up to the max of the annual gift tax exclusion for that given year ($17,000 in 2023). A rule, however, allows you to make a lump-sum contribution of five times the annual gift tax exclusion and spread the contribution out over five years for purposes of the gift tax.

  • The beneficiary of a 529 account can be changed, provided that the new beneficiary is a qualified family member.


529 plans are an excellent instrument for saving for your children’s education. They have significant tax benefits and offer a way to combat rising tuition costs.

If you want to learn more about 529 plans or have any questions, please contact Vernon Management Group at

Vernon Management Group logo

This is not tax advice please consult your tax advisor before making any tax decisions

*Please consult your tax advisor before you make decisions that involve tax laws


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Jacob Vernon an Investment Advisor Representative at Vernon Management Group

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