In June of 2014, as a single, childless 26-year-old, I opened a 529 college savings plan for a kid I didn’t have. A few years ago I wrote that doing so was the most impactful 30 minutes you can have on a child. I still believe that, but for a long time, it was a bit of a punchline.
Friends would ask about my investment accounts. I’d walk them through the 401(k), the Roth IRA, the general brokerage account, and then, somewhat sheepishly mention, “Oh, and there’s a 529 for a kid I don’t have yet.” Raised eyebrows every time.
To avoid burying the lede: this July, 145 months after that account was originally opened, my wife and I are expecting our first child. We are absolutely over the moon for this next chapter of our lives, and yes, the 529 beneficiary update is already on my to-do list.
Beyond the personal news, I’ve been reflecting on why I opened that account all those years ago, and why I think the story behind a 529 plan matters just as much as the numbers inside one.
A quick refresher on how 529s work
For those unfamiliar, here’s the short version.
1.) You contribute after-tax dollars into an account designated for qualified education expenses, and the money grows completely tax-free inside the account.
2.) Withdrawals are also tax-free when used for qualified expenses – tuition, room and board, books, supplies, and more.
3.) You, as the parent or grandparent own the account and stay in control. Your child or grandchild is named as the beneficiary.
From a pure math standpoint, this is simply a more efficient way to save. Tax-free growth means more dollars go toward education rather than to the government. With that said – it’s about so much more than just the numbers.
It’s about more than the money
Growing up, my grandma put ~$2,000 into an investment account for me. In the grand scheme of things, it wasn’t a life-changing sum, but what it represented was enormous. I had a family that looked at me and said, without words: we believe in your future, and we believe you’re going somewhere worth saving for.
That’s what a 529 plan communicates to a child. Not “here is money,” but “higher education is a baseline expectation in this family. Not a question of if, but how.” When children grow up hearing about their college account, when it’s talked about casually and openly, it normalizes the aspiration and gives them direction.
I think about this a lot in the context of how I invest my own money. Many of my financial habits were shaped by what I saw and heard growing up. Money was talked about, delayed gratification and saving were habits that were developed, and the stock market was something I followed in the Business section of the Seattle Times. That context formed me.
A 529 plan is a vehicle for creating that same context for your child. The earlier it starts, the more embedded that message becomes.
The Plan is more Flexible Than you Might Think
One of the most common objections I hear is some version of: “What if my kid doesn’t go to college?” It’s a fair question – the landscape of higher education is clearly changing, but the flexibility built into 529 plans is becoming more powerful.
More Than 4-Year Colleges
Eligible expenses extend well beyond 4-year universities. Vocational schools, community colleges, apprenticeship programs, and even many international institutions all qualify.
Change the Beneficiary
If one child doesn’t use the funds, you can reassign the account to a sibling, cousin, grandchild, or even yourself for graduate school.
Full Ride Scholarship? No Problem!
If your child lands a scholarship, penalty-free withdrawal options exist for the scholarship amount.
You’re In Control
Unlike a UGMA or UTMA account, you as the owner maintain full control. Your child never automatically gains access at a certain age like with other account types.
Fund a Roth IRA!
Thanks to the SECURE Act 2.0, beginning in 2024 unused 529 funds can now be rolled over into a Roth IRA for the beneficiary – up to $35,000 lifetime, subject to annual Roth contribution limits, as long as the account has been open at least 15 years. That provision gives overfunded accounts a second life, turning unused education savings into a head start on retirement for your kiddo. It’s hard to overstate how valuable that flexibility is.
Starting early: The math and meaning behind a 12-year head start
When I opened my 529 in 2014, I wasn’t just thinking about compound interest tables or tax efficiency, I was thinking about something simpler. I believe in the importance of education, and I wanted to put my money where my values are. If I were to one day have kids, I wanted to tell my child “we value education so much, that dad started saving for you years before you were born.” The account was as much a personal statement as it was a financial strategy.
As a “spreadsheet guy”, I also realized was how meaningful an extra decade of tax-free compounding could turn out to be. To date, over half of the account is investment earnings. By the time kiddo heads to college, the account will have been growing for over 30 years 🤯🤯🤯. Given that every bit of that growth happened without any tax on dividends, interest income, or capital gains – that’s real money.
More than the dollars though, I now get to tell my child something so much more meaningful: “I started saving for your education before you were born, and over 9 years before I started dating your mother, because I already knew you were worth it.”
That’s the kind of message no spreadsheet can capture – and it’s exactly why I’d encourage anyone thinking about starting a 529 to do it today, not when the timing feels right. Setting up an account and automating contributions takes less than 30 minutes. Open it, name a beneficiary, pick an age-based allocation, and let inertia do the rest.
In Closing
We are genuinely thrilled, and a little terrified, by this next chapter in our lives. If you’ve been through the newborn stage and have any first-time parenting tips, please send them our way!
To our little one, somewhere in the not-too-distant future reading this post that dad wrote before you arrived: Hi. We love you already. Your 529 says so.