Planning for your child's education can feel overwhelming, but a 529 education savings plan offers a powerful way to build a financial foundation for their educational future.

 

One in 4 parents currently invests in a 529 plan, according to 2025 research by Edward Jones and Morning Consult. Perhaps it's because of the tax benefits — earnings are generally tax free if the money is used for qualified educational expenses. Or perhaps it's because of their flexibility.

 

Types of education. While most people know 529 plans can help cover college and university tuition, these versatile accounts can also pay tuition for vocational and trade schools, making them suitable for students pursuing careers in skilled trades like plumbing, electrical work or culinary arts. Additionally, some apprenticeship programs qualify for these funds. And even K-12 tuition expenses are covered, up to $10,000 per year for private, public and religious elementary and secondary schools.

 

Beyond tuition. Withdrawals from a 529 plan can move beyond tuition and cover the cost of room and board for students enrolled at least half-time. They can help pay for books, computers and qualified educational supplies. And a big surprise for some: A 529 plan can help with student loan repayment up to $10,000 per beneficiary.

 

Who can contribute. Fortunately, 529 plans welcome contributions from anyone — parents, grandparents, other family and friends. Contributions are treated as gifts to the beneficiary, so most contributors will want to stay within the annual nontaxable gifting limit (which for 2025 is $19,000 for individuals or $38,000 for married couples filing jointly).

 

Interestingly, 1 in 5 parents would prefer for their child to receive 529 contributions as gifts from loved ones, making these accounts perfect for birthdays, holidays and other special occasions.

 

Multiple children. If you have multiple children, you have options in how you structure your 529 savings. You can maintain separate accounts for each child or use one account for all your children.

 

Unused funds. You may be concerned about what happens if your child doesn't use all the money. Fortunately, these accounts offer numerous penalty-free options. You can easily change the beneficiary to another qualifying family member, including siblings, nieces, nephews, grandchildren or even yourself as the account owner. 

 

You can also roll funds to another family member's existing 529 plan. If your child receives a scholarship, you can withdraw up to the scholarship amount without penalty (though you'll pay income tax on a portion of the money). The IRS allows an option to roll up to $35,000 into a Roth IRA for the beneficiary if certain requirements are met. You should consult with your tax advisor on this 529/Roth IRA rollover issue.

 

State options. It's important to note that 529 plans vary from state to state, and you're not limited to your home state's plan. However, it's smart to examine your home state's offerings first, as many provide special incentives like tax breaks for residents. 

 

When comparing plans, consider factors such as tax benefits, fees, investment options and ease of use. A good financial advisor can help you navigate these choices and identify the plan that makes the most sense for your family's specific situation and goals. 

 

529 education savings plans offer flexibility and tax advantages that help make them an excellent tool for education planning. With their expanded uses and multiple options for unused funds, they can help provide families with both security and adaptability in preparing for their children's educational futures.