Toys Are Fun, but Gifting for College Lasts a Lifetime

Adult handing a child a small red package as a gift.

Toys Are Fun, but Gifting for College Lasts a Lifetime

The holiday season is a time for giving, and while toys bring instant joy, they’re often outgrown or forgotten. A contribution to a child’s college savings fund, however, is a gift that grows over time and can create lasting joy and opportunities for years to come.

According to the College Savings Foundation, 65% of parents plan to ask friends or family to contribute to their child’s 529 plan during holidays, birthdays, or other special occasions. In fact, more than $1 billion was gifted into 529 plans in 2023 alone.

It’s never too early—or too late—to start building a college fund. With 529 savings plans now covering more than just college expenses, contributing to one is a smart, forward-thinking way to support a child’s future. Here’s how you can make a meaningful impact this holiday season:

Contribute to an Existing 529 Plan

If the child already has a 529 plan, ask their parents for details about the program they’re using. You can use this interactive map to explore gifting options for different plans.

Alternatively, companies like Gift of College and Backer offer flexible gifting platforms compatible with most 529 plans. Gift of College cards, for instance, can be purchased online or at select retailers like Walmart and CVS. For a more personal touch, you can customize gift cards through their website.

You’ll also find a variety of gifting platforms and resources through the College Savings Foundation at CollegeSavingsFoundation.org.

Open a New 529 Savings Plan

If the child doesn’t have a 529 plan yet, you can start one for them. These tax-advantaged accounts are among the most popular ways to save for a child’s future educational expenses.

Starting a plan is simple and often free, with initial contributions as low as $25 in many cases. Use tools like the National Association of State Treasurers’ plan comparison tool to find a suitable plan.

529 plans come in two main types:

  • Direct-Sold Plans: Offered directly by states, these plans often have lower fees.
  • Advisor-Sold Plans: Managed by financial advisors, these plans may have higher fees but provide professional guidance.

Regardless of the type, 529 plans offer flexibility, tax advantages, and a range of investment options. Be sure to consider factors like long-term returns, state tax benefits, and contribution limits when selecting a plan.

Take Advantage of the Benefits of 529 Plans

529 plans are designed to make saving for education easier and more rewarding. Key benefits include:

  • Tax-Free Growth: Earnings grow tax-deferred and can be withdrawn tax-free for qualified educational expenses.
  • State Tax Deductions: Many states offer tax breaks for 529 contributions. Use this state tax deduction tool to see what’s available in your state.
  • Gift Tax Advantages: Contributions count as gifts and are eligible for annual exclusions. For 2024, individuals can gift up to $18,000 ($36,000 for couples) tax-free, with a unique five-year option allowing up to $90,000 ($180,000 for couples) in a single year.

529 plans also offer flexibility and control, allowing account owners to:

  • Use funds for a wide range of educational expenses, including tuition, fees, room and board, textbooks, and even student loan repayments.
  • Change the account beneficiary as needed.
  • Keep the account separate from their estate for tax purposes.

Think Beyond College

Funds in a 529 plan can be used for more than traditional four-year colleges. They can cover vocational schools, apprenticeship programs, community colleges, K-12 tuition, and even some international institutions. Additionally, unused funds may be rolled into a Roth IRA under certain conditions.

Keep an Eye on Future Changes

Tax laws and contribution limits can change, so it’s important to stay informed. For example, the annual gift tax exclusion is set to increase to $19,000 per individual ($38,000 for couples) in 2025.

Conclusion

Contributing to a 529 plan is one of the most thoughtful and impactful gifts you can give. Whether you’re adding to an existing account, opening a new one, or using a gifting platform, your contribution helps pave the way for a brighter educational future.

So, go ahead and pick up that toy if you must—but pair it with a 529 gift. It’s a meaningful way to spread holiday cheer while shaping a child’s future.