New Year, New Goals: Tips for Effectively Growing Your 529 Plan in 2024

As we usher in the new year, it's a great time to reflect on our financial goals and set a course for a brighter future for our loved ones. For parents and loved ones, one of the most impactful long-term investments is saving for a child's education. A 529 plan is a powerful tool to help achieve this goal, providing a tax-advantaged way to save for higher education expenses. Let’s explore some strategies for effectively growing your 529 plan in 2024.

Contribute early and regularly

The power of compounding should not be underestimated. Starting early is key when it comes to saving for education, so make it a habit to contribute regularly to your 529 plan. Setting up automatic contributions can simplify the process and help ensure that you're consistently building a child's education fund. Even small, consistent contributions may grow significantly over time.

Automatic contributions are an effective, set-it-and-forget-it approach. To encourage saving, some employers even allow automated contributions directly from your paycheck to your 529 plan. Hypothetically, a $200 monthly contribution could grow to more than $41,400 in 18 years.¹ A fixed, scheduled contribution­—also known as dollar cost averaging may also be an effective way to mitigate market volatility and lessen the importance of market timing, which is a greater consideration with large, infrequent contributions.

Learn more about automatic 529 plan contributions.

Take advantage of gift contributions

Many 529 plans allow third-party contributions, providing an excellent opportunity for loved ones to contribute to your child's future. The gift of education is one that lasts a lifetime. Encourage friends and family to contribute to your child's 529 plan for special occasions like birthdays and holidays. Relatives and friends can easily contribute to an existing 529 plan using a free and convenient service called Ugift. Remind them that by making a gift to a 529 plan, they may be able to take advantage of state tax deductions.

Review and set goals

Start the year by revisiting your financial goals and setting realistic expectations. What are you envisioning for the child's education? Be specific about the type of institution and the associated costs, which can vary significantly. The average sticker price for a four-year, public in-state college for the 2023–2024 school year was $11,260. The price of a private four-year program, on the other hand, was nearly quadruple that at $41,540 per year².

According to College Board, tuition and fees are expected to increase by 3%–5% annually. For a child born in 2020, the cost of four years at a private college could rise to $484,808 by the time they start college in 2038.³ That’s more than double the $219,520 cost of a private four-year education in 2020. Setting clear goals will help you determine how much you need to save and the investment strategy that aligns with your objectives.

Remember, the journey to affording higher education is a marathon, not a sprint. With careful planning and consistent contributions, you can build a robust 529 plan that paves the way for your child's success. Happy saving!

As always, if you're unsure about the best strategies for your 529 plan, seek out the expertise of a financial professional. They can provide personalized advice based on your unique financial situation and help you make informed decisions that are aligned with your goals.