The Gift of Education: 529 Savings Plans

by Craig Moser on August 9, 2019

At one time or another, you may be asked what to get your child or grandchild for their birthday or graduation, as a Christmas present, or a gift for some other occasion.  When this happens, let them know the gift of college, though a 529 plan, would be most appreciated.

Between 2005 and 2006, the cost of undergraduate education increased 34%1 at public colleges and universities.  And that cost continues to increase by an average of 3.1% yearly at public universities.2 Add that to the average annual inflation rate, and paying for college can become a significant challenge.  To help offset the cost, it can be a good idea to ask for a contribution to a 529 plan rather than toys and games.  Afterall, it’s a gift that can have a lasting impact.

Every Little Bit Helps

If there is a minimum deposit amount on a 529 plan, it’s usually $25 or less.  And because the account can grow through compounding interest, every little bit helps.  If only 5 people give $20 each for the first 10 birthdays, that adds up to $100/year or $1,000 over the child’s first 10 birthdays.  When you look at that $1,000 and calculate compounding investment returns in a 529 plan, each $20 gift makes a meaningful impact.

More than likely, you child’s 529 plan has instructions on how people can contribute your child’s account.  Some may provide a link you can email directly to those who want to contribute.  Others will provide a mailing address and instructions.

Asking for 529 Savings Plan Gifts

Some people may feel uncomfortable asking for a gift to their child’s 529 plan.  However, it can be worth getting over the initial discomfort.  While children might not appreciate the long-term gift of education immediately, they will appreciate it when they’re ready for college.  It’s also an opportunity for parents and grandparents to make the child understand how important education is and the value of saving for the future.  Here are some tips to help your family, friends, and children understand the significance of gifts to a 529 plan:

  • While the child is young, open a 529 plan and let your family and friends know gifts to the 529 plan are always an option. When your child is old enough, tell them about the account and explain sometimes people give them gifts through the 529 plan too.  This normalizes it and makes it a routine around birthdays and holidays.
  • To allow your family to share in your child’s academic success, consider sharing report cards. You can do this by making copies and including instructions, or a link, to where/how they can contribute to the child’s 529 plan.
  • It’s more likely people will give small amounts frequently rather than making a large, one-time deposit. Help your family feel comfortable with this by letting them know a $50 gift today could potentially be worth nearly $200 in 20 years.
  • Celebrate graduations of all kinds.  Think about celebrating graduation from pre-K,  5th grade, etc. with a small gift to your child’s 529 plan.
  • You should also note giving to a 529 plan may help reduce estate taxes. Gifters can contribute up to $15,000 per person, per year, without gift tax ramifications.  A married couple could gift up to $30,000/year without paying a gift tax or eroding their lifetime gift tax exclusion.  Once the gift is made, the money isn’t part of the gifter’s estate for estate tax purposes.
  • For larger contributions, you may want to consider “superfunding”.  Superfunding is a term sometimes used to describe large 529 plan contributions.  It uses a 5-year gift tax averaging strategy, and you must follow specific rules..

The Gift of College

No matter how someone chooses to give, or the amount they choose to give, each dollar in a 529 plan helps fund your child’s future.  Contributing to a 529 plan is one way to give your child the tools to thrive and help achieve a bright future.

1. Fast facts: Tuition costs of colleges and universitiesOpens in a new window,, National Center for Education Statistics, 2018
3. Grandparents and College Savings Study, Fidelity Investments, June 2014.

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