How to Start Aggressively Saving for 529 Plans—and Why It Matters

One of the most common questions I hear from parents is: How can we afford college? With tuition costs rising faster than inflation, preparing for higher education has become one of the biggest financial challenges for families today. The good news is that with the right strategy, you can harness the power of tax-free growth through 529 plans—and the earlier and more aggressively you start, the more dramatic the results.

What Is a 529 Plan?

A 529 plan is a tax-advantaged savings account designed specifically for education expenses. Money contributed grows tax-deferred, and as long as withdrawals are used for qualified education costs—such as tuition, books, and room and board—the growth is completely tax-free. Many states also offer tax deductions or credits for contributions, adding another layer of savings.

Why Starting Early Matters

The biggest advantage of a 529 plan is time. The earlier you start, the longer your money has to grow through the power of compounding. Even modest contributions made consistently can turn into a sizable education fund over 15 to 20 years.

Consider this: the cost of a four-year education at a public university today averages more than $100,000, and private universities often run $250,000 or more. Without a savings plan, families face the difficult choice of using current income, borrowing heavily, or dipping into retirement funds.

By starting early, you give yourself the chance to build a dedicated education account that reduces (or eliminates) the need for student loans.

Aggressive Saving: What It Looks Like

Aggressive saving doesn’t necessarily mean putting every spare dollar into a 529 plan. It means being intentional, consistent, and perhaps stretching your contributions beyond what feels comfortable today, knowing the payoff will be significant later. Here are a few approaches:

• Front-Loading Contributions: If you have the means, consider making large contributions early in your child’s life. The IRS allows “superfunding” a 529 with up to five years’ worth of contributions at once ($90,000 per parent in 2024 without triggering gift tax, or $180,000 for a married couple).

• Automatic Monthly Contributions: Treat the 529 like a retirement account—set up automatic monthly deposits. Even $500 a month from birth through age 18 can create a six-figure balance.

• Redirect Windfalls: Bonuses, tax refunds, or gifts from grandparents can be funneled into the 529 plan to give it a boost.

Example 1: Starting Early vs. Waiting

Let’s say two families both want to save for college:

• Family A starts saving $500 per month when their child is born.

• Family B waits until the child is 10 years old, then starts saving $1,000 per month.

  
  

Assuming a 6% annual return:

• Family A’s account at age 18: ~$190,000

• Family B’s account at age 18: ~$136,000

  
  

Even though Family B contributed more per month, Family A ended up with nearly $55,000 more—because they gave compounding more time to work.

Example 2: The Power of Tax-Free Growth

Suppose you contribute $50,000 into a 529 plan when your child is very young. Invested in a diversified portfolio at 6% average annual growth, by age 18 that balance could be worth ~$143,000.

Here’s the key: if you had saved that same $50,000 in a taxable investment account, the growth portion (about $93,000) would likely be subject to capital gains tax. Even at a 15% tax rate, that’s nearly $14,000 lost to taxes. In the 529, you keep it all, tax-free, for education expenses.

What If My Child Doesn’t Use It?

One hesitation parents have is the “what if” scenario: What if my child doesn’t go to college? The good news is 529 plans are flexible. Funds can be transferred to another child, used for graduate school, or even passed on to future grandchildren. Recent law changes also allow limited rollovers of unused funds into a Roth IRA for the beneficiary, subject to certain limits.

In other words, your money doesn’t go to waste—it stays in the family.

Practical Steps to Start Saving Aggressively

Open the Account Now: Don’t wait until your child is in school. Even if you can’t save much at first, opening the account and automating contributions builds momentum.

1. Set a Realistic Target: Decide how much of college you want to fund—100%, 50%, or just tuition—and reverse-engineer your monthly contribution from there.

2. Invest for Growth: With an 18-year horizon, you can afford to invest more aggressively early on. Many 529s offer “age-based” portfolios that gradually become more conservative as college approaches.

3. Involve Family: Birthdays and holidays are perfect opportunities for grandparents or relatives to contribute to the 529 instead of adding more toys to the closet.

4. Review Annually: As your income grows, revisit your contributions. Increasing them even slightly each year can dramatically improve outcomes.

The Long-Term Payoff

The benefit of aggressive 529 saving isn’t just financial—it’s emotional. Parents who plan ahead often feel less stress about college costs and more freedom to let their children choose the right school without money being the sole deciding factor. For the student, it reduces or eliminates the burden of student loans that can take decades to repay.

Imagine sending your child to college knowing the tuition bill is already covered by years of smart planning. That peace of mind is priceless.