529 Plan

A 529 plan (named for the tax code with the same number) is one way you can save money for a child’s education. The general idea about 529 plans is this: You can salt away after-tax money into a 529 plan and those funds will grow tax free in the plan as long as you use the funds for approved college expenses. Each state offers different 529 plan options, but you don’t necessarily have to invest in the 529 plan for your state. There may be tax benefits for investing in your home state plan, but if the plan is expensive or doesn’t offer stellar returns, you may do better by investing in a different state’s plan. How do 529 plans work? At what point should you open a 529 plan for a child? And how does the money in a 529 plan get taxed? Learn more about 529 plans from this topic page.

Leftover Funds in a 529 Savings Plan: What to Do With the Money