Can you have multiple kids on a 529 savings plan?

When investors are first learning about opening a 529 savings plan to prepare for their child's educational expenses, a common question is, "Can we have more than one child on a 529?" The short answer is no –– or at least, not at the same time. There can be only one account owner and one beneficiary per 529 savings plan at any given time. However, the beneficiary can be changed once annually. So, the slightly more complex answer is that yes, you can use the same 529 plan for more than one child or beneficiary, but it may not be in your family’s best interest to do so.

It’s usually best to have a specific 529 plan for each beneficiary. Here’s why:

• Tax benefits. A key benefit to opening a 529 plan is being able to save for college free from tax burdens while simultaneously building on these savings.¹  If 529 funds are used to pay expenses for multiple children at the same time — only one of whom can be listed as the beneficiary — funds spent on the non-beneficiary children will usually be regarded as a non-qualified withdrawal and are therefore subject to income tax as well as a 10% penalty on the earnings.
• A more tailored savings strategy. Importantly,  saving for one child per account means that investors can take advantage of age-based portfolios. Age-based investments lean largely on equities when a child is younger, and then shift to more conservative investments as high school graduation draws near. Saving for multiple children in one account means settling for a less-tailored investment strategy.
• Transparency. One child may have their heart set on a costly private school, while another child may wish to pursue a trade profession. No matter their goals, it’s important to sit down with each child periodically so that they can see and understand how their own accounts are performing and how that might impact their educational goals and dreams.
• Clear intentions. In the case of a death or a divorce, the account owner may need to change on a 529. In those cases, there may be questions regarding the application of funds when a single account is being used to save for multiple children. This could end up being murky and challenging financial territory.

What if my child doesn’t need the funds?

One common reason why families might be wary about opening an account for each child is this simple question — what if one child doesn’t need the funds, because they decide not to attend college, they receive a full-ride scholarship, or some other reason?

In those instances, you can change the beneficiary to one of your other children — even if they’re already the beneficiary of their own 529 plan. Or, you could name yourself as the beneficiary and pursue your own higher education goals! 

To consider your options and build a plan that fits your needs. Visit our ABCs of Education page to learn more. 

Questions?

It’s common to have questions about 529s and your plans to invest. Get answers to common questions you may have about saving for college by visiting our FAQs Page. Please reach out to your financial professional to get started today.