By Paula Smith, Senior Vice President, Product Strategy and Development – Retirement and College Savings, Voya Investment Management

May 25, 2021

My nephew was born in 2005. As the only grandchild (at the time) for both sets of his grandparents, over the years he’s gotten many gifts from his large extended family. Many of these gifts have since migrated to the attic or have been given to other relatives as he’s gotten older.

For years I resisted giving him toys or the latest video game for every birthday, holiday, or special occasion. Instead, I contributed what I would have spent on a gift to a 529 account that I established for him when he was first born.

While it may seem a bit unkind, at least by my nephew’s standards, to not to let a kid open a gift on his birthday, holiday, or special occasion, I was determined to stick to my plan. From my own experience, I knew that (1) gifts get tossed aside fairly quickly as children grow; (2) college is expensive and comes rapidly; and (3) the potential tax-free growth of a 529 plan was worth a few frowns.

I eventually opened an account for my niece when she was born in 2008 and started contributing $25 a month to both accounts, on top of the bigger gifts.

Saving for college, especially via gifting, is a long game. I’m pleased to say that through a combination of the larger financial gifts, very small monthly contributions, tax-free growth and a robust market, my nephew, now age 15, has an account balance of roughly $14,000! My niece, who is about to turn 13, has an account balance of roughly $12,000. I hope to see both accounts continue to grow.

While I know this money won’t cover a 4-year education – their parents are saving for that— it is gratifying to know that the toys and games they likely would have forgotten have turned into a way to help them in the future. The average student borrows about $30,000 to pursue a bachelor’s degree*. If they had to borrow the average, I know I would be cutting that amount in half—and, if you factor in interest, more than that.

So, as we celebrate 529 Day on May 29, I have a few thoughts on gifting as a slow and steady way to help build towards college:

  • Consider gifts to a 529 as an alternative to the latest and greatest toy, game, or gadget.
  • As beneficiaries get older, talk about the 529 account – it can initiate a great discussion around financial literacy and also trigger a broader discussion of their hopes and dreams for college.
  • For your own children, gently suggest to grandparents and other relatives that they contribute to a 529 account in lieu of a larger gift.
  • Even if the beneficiary doesn’t want to go to college, 529s are flexible: the funds in a 529 can, in most cases, be used to finance other advanced educational opportunities such as trade schools.


About the author:

Paula Smith is Senior Vice President, Product Strategy and Development – Retirement and College Savings, for Voya Investment Management, a wholly owned subsidiary of Voya Financial. Voya Investment Management serves as 529 Program Manager for the Wisconsin Tomorrow’s Scholar® program and the Iowa IAdvisor® program. She has over 20 years of experience working with retirement plans and 529 programs.

* Source: The Institute for College Access and Success, 15th Annual Report, October 2020.