Home / Money

Starting to save for your child’s education

How 529 plans work, starting small and automatic, letting family help, the rules for using the money, and balancing with retirement.

Quick answer

A 529 plan lets money grow without federal tax and come out tax-free for qualified education costs like college tuition, and many states add a state tax break. Start small, even $25 a month, and make it automatic. Many plans let grandparents and relatives contribute. You can usually switch the beneficiary to another family member; non-education use can mean taxes plus a penalty on earnings. Don’t skip your own retirement savings to fund college.

Watch full screen

Your checklist

  • Look at your state’s 529 plan
  • Start small and make it automatic
  • Let family contribute
  • Know the rules for using the money
  • Know you can switch to another family member
  • Don’t skip your own retirement

Rather read it? Here’s the whole thing.

Why start now

Time is the biggest helper. Small amounts saved early can grow over 18 years.

529 plans

  • Money grows without federal income tax.
  • Withdrawals are tax-free for qualified education expenses, like college tuition, fees, books and room and board; some K–12 and other uses also qualify, within limits.
  • Many states give a state tax deduction or credit for contributing to their plan.
  • You can usually change the beneficiary to another family member.
  • Using money for non-qualified expenses generally means income tax plus a 10% penalty on the earnings.

Start simple

Open your state’s official plan or compare others. Set up automatic monthly deposits, even small ones.

Family gifts

Many plans let relatives contribute directly, a meaningful gift for birthdays and holidays.

Balance it

Prioritize an emergency fund and your own retirement savings, especially any employer 401(k) match. Your child can get aid and loans for school; there are no loans for retirement.

Financial aid

Parent-owned 529 accounts generally have a modest effect on financial aid. Rules can change; check before college.

Official sources, and where to look

To find your local office, search for:

  • [your state] official 529 plan
  • 529 plan fees compare

Pick sites that end in .gov. Official forms are almost always free.

Common questions

What if my child doesn’t go to college?

You can change the beneficiary to another family member, use it for other qualified education like trade school, or withdraw it with taxes and a penalty on earnings. Some new rollover options exist with limits. More ›

Do I have to use my own state’s 529 plan?

No, but your state may give a tax break only for its own plan. Compare fees and benefits. More ›

What is a 529 plan?

A tax-advantaged savings account for education. Earnings grow federal tax-free and withdrawals are tax-free for qualified education expenses. More ›

How much should I save for my child’s college?

Any amount helps. Starting small and early, with automatic deposits, matters more than a perfect number. More ›

Can grandparents contribute to a 529 plan?

Yes. Many plans let relatives contribute directly or through gift links. More ›

What happens to a 529 if my child doesn’t go to college?

You can change the beneficiary, use it for other qualified education, or withdraw it with taxes and a penalty on earnings. Limited rollover options also exist. More ›

See all questions (8)

Find financial planning help

Fee-only planners and free resources are available.

Shown in random order. We don’t rank or recommend anyone. Some listed pros pay to be listed. Check a license before you hire.

No one is listed here yet. Check back soon.

Know someone who needs this?

Part of:We just had a baby

Not yet reviewed by an expert. Last checked 2026-10-29. This is general help, not legal, medical or professional advice. Rules are different in every state.