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Will National 529 Day Take Our Education to the Next Level


Protect Your Wallet: Combatting Shrinkflation and Skimpflation

April 28, 2024

Are you prepared to supercharge your child's education savings? Mark your calendars for May 29th! It's Van Pappas' birthday but also National 529 Day and it's just around the corner. This is the day dedicated to promoting awareness and understanding of 529 college savings plans and is a great opportunity to revolutionize the way you plan for your child's academic journey. As the importance of education continues to grow, National 529 Day serves as a reminder to families about the benefits of planning for their children's academic future.

There are several ways to pay for your child's education. You could pay as you go, but you run the risk of not having enough income to cover the expense when the time comes. You could borrow money (student loans) and pay off in the future, but that could affect your ability to achieve other goals. Your child might get scholarships or grants, but there is no guarantee that they will qualify. OR… you could start saving in an educational account.

Understanding 529 College Savings Plans

A 529 plan is a tax-advantaged savings plan designed to encourage saving for future education costs. Named after Section 529 of the Internal Revenue Code, these plans offer a flexible and efficient way for families to invest in a child's education. There are no annual contribution limits like retirement accounts, but each state will have a lifetime contribution limit, usually in the hundreds of thousands. If distributions are used for qualified educational expenses, they are tax-free. The distributions can be used for K-12 private school up to $10,000 per year and unlimited distributions each year for college expenses.

Benefits of 529 Plans

Tax Advantages: Contributions to 529 plans are not federally tax-deductible, but the earnings within the plans grow tax-free. Withdrawals used for qualified education expenses are also tax-free at the federal level.

Flexibility: 529 plans offer flexibility in terms of the choice of beneficiary, meaning that funds can be used for various educational pursuits beyond traditional four-year colleges, including vocational schools and community colleges. The beneficiary can be changed once per year, so if your child does not use the funds, you can change the beneficiary to a second child or other family member.

Generational Planning: Grandparents and other family members can contribute to a 529 plan, allowing for collaborative efforts to fund a child's education. This makes 529 plans an excellent tool for generational planning.

State Benefits: Many states offer additional tax benefits or incentives for residents who contribute to their state's 529 plan. Since you can buy a plan in any state, regardless of if you live there, it is important to compare investment options against any state tax deduction you might get.

Planning Your Contributions

  1. When planning how much to fund your 529 Plan, there are some questions you should ask yourself:
  2. What do you think the rate of inflation is going to be for college costs? College costs have been going up at a rate higher than the federal inflation rate. Instead of using the standard 3% annual increase, consider planning around a 5 or 6% rate.
  3. How much of the education do you plan to fund? If you want your child to come out of school with no student loan debt, you need to know what that will cost. Start with looking at the current cost of the education. Using a state average is the easiest way to do the calculation. Then just your inflation rate and the number of years until your child is of college age.
  4. Can you expect any family help? While it can be uncomfortable discussing finances with family members. Sit down with grandparents or other interested family members. If they are willing to chip in, this could reduce the amount you need to contribute on an annual basis.

As National 529 Day approaches, it serves as a reminder of the importance of planning for the educational journey that lies ahead. It's also a reminder of the joke: "Why did the student bring a ladder to National 529 Day? Because they wanted to take their education to the next level!"


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About the author

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Van Pappas

Vice President, Private CFO®

Van Pappas, CFP® - Van is a native of Atlanta. He holds his undergraduate degree in Finance with an emphasis in Real Estate. As a planner for 15 years, he earned his CFP designation from Kaplan University. He is currently the Chairman and founder of the Chamblee Chamber of Commerce and sits on the Downtown Development Authority for the City of Chamblee. In 2012, he noticed the value of helping the X-Y Generations and decided to merge his practice with oXYGen Financial.

Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. oXYGen Financial is not affiliated with Kestra IS or Kestra AS. Kestra IS and Kestra AS do not provide tax or legal advice. Investor Disclosures: https://bit.ly/KF-Disclosures

The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation.

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.

Background and qualification information is available at FINRA's BrokerCheck website.

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Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. oXYGen Financial is not affiliated with Kestra IS or Kestra AS. Kestra IS and Kestra AS do not provide tax or legal advice. https://Bit.ly/KF-Disclosures

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