Saving for Education: My 529 Experience


Gold pig on money

This year we finally got around to setting up a DC College Savings Plan, a 529 plan, for Junior. I really didn’t think too hard about it, as this is not my first experience with 529 plans. Less than a decade ago, I set up a Florida state-run 529 plan for my niece, and this year we finally drained every red cent from that fund for her freshmen year at a state school.

529 Plans: What are they?

I am not a financial advisor. But I’m a very hands-on kind of gal when it comes to my family’s money. Do your own research regarding your state’s or other 529 plans that’s out there and talk to your financial advisor, if you have one.

Now with that little disclaimer out of the way, according to the SEC:

A 529 plan is a tax-advantaged savings plan designed to encourage saving for future education costs. 529 plans, legally known as “qualified tuition plans,” are sponsored by states, state agencies, or educational institutions and are authorized by Section 529 of the Internal Revenue Code. 

There are two types of 529 plans: prepaid tuition plans and education savings plans. All fifty states and the District of Columbia sponsor at least one type of 529 plan. In addition, a group of private colleges and universities sponsor a prepaid tuition plan. 

Lessons Learned

I learned a lot from starting a 529 plan for my niece. My first mistake was being too conservative with the 529. I regret not choosing more aggressive funds in the beginning. I had too much in the safer, fixed-income option. When we started the fund, we didn’t have a lot of time for the savings to grow. 

I should have invited other relatives to contribute. I was only contributing $50 a month, plus a few hundred here and there if I had extra cash around. If I had recruited (or gotten my niece to recruit) other family members to add to the fund, we might have been able to save enough to last past her first year of college.

After she graduated high school, we had some disbursement hiccups. Those hiccups were due to some communication problems with my niece. It didn’t help that our prime form of communication was via text. The issue was that I could get the funds deposited into my bank account in a few days but she could only get a check. This created a problem because she’d wait until the last minute to ask for money for rent or supplies. This became a problem after a few incidents. I decided that the Florida College Savings Plan send her the remaining funds.

Since our plan for Junior is to use his 529 plan for private high school because of what some reading has inspired. We hope not to have the same level of drama as I experienced with my niece’s fund. If there is anything left over for college, we’ll directly be involved with his college expenses as his parents.

Saving is easy when you start early. Comment below to let us know how you are saving for education.