By Mary Morris, Virginia529 CEO and College Savings Plans Network, Chair
As we step into 2024, let’s take a moment to reflect on the progress made in education savings over the past year. In 2023, 529 plans across the nation seemed to shake off some of the post-pandemic doldrums of the prior year and saw significant growth, with more families than ever investing in their loved one’s future education.
According to recent data, the amount invested in 529 plans increased by 14% compared to the previous year, to $470 billion in total savings — closing in on half a trillion dollars in education savings!
Particularly encouraging is that the number of 529 accounts opened nationwide reached an all-time high in 2023, surpassing 16.4 million. Account growth can better indicate the impact of 529 plans as it is based on the people committing to investing in the future, whereas the financial markets impact asset growth. 529 plans across the country are dedicated to encouraging people of all household income levels to open 529 accounts and finding ways to increase awareness of the programs and provide affordable options.
Another indicator of success in 529 plans is average account size growth — in 2023, that increased by 11%. The national average account size now approaches $29,000, covering more than two years of tuition at a typical public, in-state college or university — and going even further for a student opting to start at a community college. These figures highlight the positive impact of consistent saving and careful planning. They also show more work to do as the average student loan debt held by borrowers now tops $37,000.
So, for 2024, what are some simple ways to approach education savings that will really work? Here are seven practical tips to help you succeed in education saving:
- Get started: Begin your savings journey today. Most 529 programs have low opening balance requirements — as little as $5 or $10 (and, in some cases, no contribution) may be required to open a 529 account.
- Use “found” money: Take advantage of unexpected windfalls, such as tax refunds, by putting them into your 529 account. This will boost your savings and maximize your long-term growth potential. Many 529 programs make this contribution easy by providing a direct deposit option when filing your taxes.
- Make saving easy: Set up automatic contributions from your bank account or paycheck to ensure consistent saving without having to think about it. Just $5 or $10 a month consistently going to your 529 account will make a real difference in the future.
- Share your goals and encourage gifts: Let your student know about their 529 account and encourage contributions from family and friends for special occasions. Gifting platforms and options abound today, making it easy to jumpstart educational savings — with safe and secure ways to use social media and other messaging to encourage gift contributions.
- Increase contributions gradually: Once you take Step 1 and get started, try to increase your contribution rate at least annually, target a percentage increase per year, or take action when you get that raise at work, child care costs decrease, or you pay off that student loan you carried because you didn’t have a 529 account.
- Communicate with your 529 plan: Log into your account frequently, review and update your account details at least annually, and ensure that everything is accurate and aligned with your goals— the start of a new year is a great time to check in if you didn’t do it at year-end.
- Review your investment strategy: Check your portfolio allocation at least annually to ensure it matches your savings goals and risk tolerance.
By following these tips and staying committed to your education savings goals, you can set yourself up for success in 2024 and beyond. With careful planning and consistent effort, you can provide valuable opportunities for your loved ones’ — or your own — future education.
About the author: Mary Morris is the CEO of Virginia529 and the chair of the College Savings Plans Network.