In Education Planning

Nothing tends to be more important to a parent than his or her child’s well-being. And when it comes to preparing for a child’s future, parents can overleverage themselves right out of their own retirement security if they’re not careful.

According to the College Board, the average cost of tuition and fees for the 2017–2018 school year was $34,740 at private colleges, $9,970 for state residents at public colleges, and $25,620 for out-of-state residents attending public universities. Multiply these numbers by four, and you’re looking at anywhere from $40,000 to $140,000 in average tuition costs alone, not including housing, meals, and supply costs.

Perhaps more alarming is that 2017 college graduates have an average $39,400 in student loan debt as they start their professional careers according to Student Loan Hero.

Luckily, there is a way to head off education costs so that you and your child aren’t swimming in student loan debt for years after graduation. Let me tell you about 529 Plans, how they work, and how you can obtain one.

An Introduction to Why 529 Plans are so Awesome

529 plans are tax-advantaged savings accounts designed to accumulate funds used to pay for education costs at eligible institutions. Prior to 2018, eligible institutions were post-secondary institutions, such as colleges, universities, and trade schools. The 529 plan rules were modified with the passage of the Tax Cut and Jobs Act, and as a result, $10,000 annually per child can now be used for tuition expenses from Kindergarten through 12th grade. Check out the IRS’ 529 Q&A for additional information on 529 plan rules.

529 plans work just like other diversified investment accounts. Factors such as the child’s age and owner’s tolerance for risk are considerations that must be made when selecting from investment options available. Unequivocally, 529 plans are one of the smartest ways you can save for future education costs. You contribute after-tax dollars to the plan, and some states offer a tax credit for funding a 529 plan, although my home state of Texas doesn’t offer such a credit because there is no state income tax. 529 plans also provide the added benefit of tax-free growth so long as you use the money on qualified education expenses!

Let me put it to you this way: If you’re not taking advantage of a 529 plan, you’re missing out on one of the most effective financial tools created to encourage people to invest in their child’s or grandchild’s future. There are no income limit requirements, age or contribution limits, which means that everyone is eligible to establish a 529 plan.

How 529 Plans Work

Who Offers Them?

Most states offer 529 Plans, but you are not restricted to your state’s plan. Contributions in 529 plans are invested in mutual funds or similar types of investment, which will be used to pay for qualified education expenses later. To learn more about the details for your state’s 529 plan, check out,

What if My Child Doesn’t Wind Up Needing It?

Maybe your child gets a full-ride scholarship or *gasp* decides he or she doesn’t want to go to traditional college, don’t worry – all is not lost.

If you don’t wind up needing the 529 plan money due to the beneficiary receiving a scholarship, you can change the beneficiary of the account to another family member, such as another child or grandchild. If money is no longer required to cover education expenses and you withdraw the funds from the account, you’ll just wind up paying taxes at your regular tax rate on the earnings portion of the withdrawal. The 10% penalty is waived when receiving a scholarship is the reason the money in the 529 plan is no longer needed to cover education expenses.

What if You Need the Money for Non-Education Expenses?

Hopefully, you don’t wind up finding yourself in a position where you need funds from a 529 Plan to cover a different financial need. But if you do, you will pay a 10% penalty and income tax on the earnings portion of the money withdrawn for non-education purposes.

How to Get a 529 Plan

You can open a 529 Plan directly through a state’s college savings program website or your financial advisor. If you are already working with a fiduciary financial advisor, this can wind up being a convenient option so that they pick the investment that is in your best interest.

As an additional resource, always updates its annual list of top rated 529 Plans. You can check out a list of the highest rated as you start your search for the right plan for your child. If you have questions about 529 Plans or are interested in getting some help to make a selection, reach out to me at



Need help creating a budget to determine how much you can contribute on a regular basis to your child’s 529 plan? Well, you are in luck! I am super excited to offer readers of my FRANKly SPEAKING FINANCIAL PLANNING BLOG access to Future Map Financial’s secure Financial Planning Tool. This financial planning tool walks you through a simple six-step process, in which you can establish financial goals, aggregate your financial accounts (i.e., checking acct, savings acct, credit card accts, student loan accts, etc.), create a budget, and calculate your net worth. The account aggregation tool pulls in all your financial transactions for the past three months and updates daily. Take the first step toward securing your financial future by creating your account and utilizing the secure Financial Planning Tool by clicking HERE.


Wish you could make more money? In the next installment of FRANKly SPEAKING, I’ll talk specifically about how you can leverage a side hustle to maximize your earning potential.

As always, I invite you to reach out to me – in real life – with any comments, feedback, or questions!  [email protected]


Disclaimer: The information contained in this article is for informational purposes.  None of the information provided in this article is intended as investment, tax, accounting or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement of any company, security, fund, or other securities or non-securities offering. Please consult with your accountant, finance professional, and/or legal counsel regarding your specific circumstance. Reproduction of this material is prohibited without written permission from Frank Shields, and all rights are reserved. Read the full Disclaimer.


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  • Edward Brown

    Hello Frank,

    This post about 529’s is great. You do not go into too much detail about the accounts but you provide just enough information. My son just turned 5 this year and I opened his 529 account. I thought you needed a lot of money to begin but in fact, you don’t. I’ve started with automatic contributions of $25/month and will increase that as my income goes up. Moving forward all birthday money he receives from relatives will be invested into his 529 as well. It may not total the entire amount he needs for college when he turns 18, but something is better than nothing. Especially from where I come from.

  • John Khoury

    Good information Frank! I was not aware of 529 plans. Gives me something to think about.

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