When it comes to saving for higher education, the thought can be daunting. But saving for multiple students at once – how can families make this work? If you opt to save for a loved one’s future education with a 529 college savings plan, you might find the flexibility and tax advantages, like a potential state tax deduction or credit, make saving for multiple students a bit more appealing than intimidating.
Here are a few things to consider if you are currently saving for multiple beneficiaries’ higher education or think you might do so in the future.
Start as early as possible: One sentiment I often hear from parents saving with a 529 plan is, “I wish we would have started sooner!” While that might seem easier said than done, keep in mind that time is your biggest asset when it comes to saving for major milestones like sending a child off to college with less of a need for student loans. When saving with a 529 plan for college and career training, the tax-deferred growth and compound earnings you might experience on your 529 investments can really add up over time. This means even modest contributions over the course of a child’s life can have a meaningful impact. When saving for multiple loved ones at the same time, modest, steady contributions to a 529 plan via payroll direct deposit or ACH can be more easily worked into a household spending plan.
Know that you don’t have to save it all: No really, you don’t! Saving with a 529 plan is just one tool in your toolbox you can use toward the cost of higher education. Saving what you can within your means is often the most approachable and lasting strategy for families. The best thing to do is start—you can always modify your contribution amount or frequency over time. For example, you might consider shifting some of what you were spending on daycare costs to your 529 plan as each child enters kindergarten. As your students near high school graduation, you’ll want to complete the Free Application for Federal Student Aid (FAFSA®) to access grants, scholarships, and work-study opportunities—all types of aid that don’t have to be repaid. Data from the College Board released in 2023 shows that full-time undergraduate students received an average of $10,680 in grant awards during the 2022-23 academic year. When coupled with aid, your savings can go even further!
Make saving a family affair: Not only do you not have to save it all, you also don’t have to do it alone. Once a 529 plan is open, anyone can contribute to it. When it comes time to celebrate birthdays, holidays, or other major milestones like graduation, you can encourage family and friends to make a gift contribution to each of your 529 accounts. Many plans make it easy to do using the Ugift® platform or via personalized gifting pages for each beneficiary. I often hear from grandparents and other family members who genuinely enjoy giving this type of gift. In fact, according to the College Savings Foundation, nearly half of the 1,000 parents who responded to their 2023 State of Higher Education Survey indicated that they prefer 529 gift contributions over traditional presents. And don’t forget to encourage your students to invest in their college savings account once they’re old enough to have a summer job!
Understand tax-free moves you can make: One of the many benefits of saving with a 529 plan is that the account owner can change the beneficiary on an account or transfer funds between accounts tax-free. So, if one of the beneficiaries you’re saving for doesn’t need all their savings – maybe they use less than anticipated to complete a technical degree or apprenticeship program – you can move some or all the funds they didn’t need to a qualified family member who could use an extra boost.
When you save for multiple beneficiaries’ college educations—no matter the final amount you accumulate—you are doing so much more than just saving. You are helping your loved ones develop a sense of self-belief, teaching them healthy financial habits, and preparing them for a future full of opportunity. Keep in mind that any dollar you save for a beneficiary today is one less dollar they will have to borrow in the future.
About the Author
Jessica Wetzel leads the Wisconsin 529 College Savings Program at the State of Wisconsin Department of Financial Institutions (DFI). In this role, she develops effective marketing and outreach strategies to increase awareness of the state’s two 529 Plans – Edvest 529 (direct-sold) and Tomorrow’s Scholar (advisor-sold) – by partnering with entities across the state on educating families on the importance of developing a higher education savings strategy. Before joining DFI, Jessica worked for over a decade in Wisconsin’s community and economic development sector. She successfully led and supported programs and organizations dedicated to helping low- to moderate-income individuals and families achieve homeownership, start small businesses, and join the financial mainstream.