I’m a financial planner, and I have a 529 plan for my child, but I don’t intentionally go over my contributions.

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• It’s never too early to start thinking about saving for college, and a 529 plan can help with that.
• However, every month I donate a small amount to my daughter’s project.
• A 529 plan is great for tax savings, but its lack of flexibility makes it not worth it to me.

A college education comes with a hefty price tag, which means it’s never too early for families to consider saving for these costs.

My daughter is 3 years old this fall. He has had a 529 plan since he was only a few weeks old. We contribute financially to his project, but there are other ways we plan for his future – education and more – beyond that.

As a financial planner, here’s how I think about saving for college and what we’re doing to plan for my family.

529 plans are useful for a specific purpose

529 plans were created with a specific purpose: like college savings vehicles that rewarded savers with tax benefits.

Your contributions can grow tax-free in a 529 plan. Distributions in the accounts are also tax-free, as long as the money goes toward qualified educational expenses.

The SECURE Act 2.0 also allows 529 account holders to make Roth IRA rollovers. This is an excellent benefit that can give families the ability to diversify accounts tax for the beneficiary of the 529 plan in the future.

529 plans sound like a big deal, because they are! I encourage almost all of my financial planning clients to open these plans for their children.

However, my wife and I only contribute $400 a month to our daughter’s 529 plan. This would leave us short of our college funding goal…if it was the only way we planned his future.

The biggest drawback of college savings plans

Part of what makes 529 plans unique is their basic limitations: You get tax benefits. if only you use the money for qualified educational expenses. You may be subject to taxes and penalties if you take money out of a 529 plan and use it for anything else.

If flexibility and choice are your top financial priorities, you need more tools to add to your 529 plan — tools that allow you to grow your wealth for any purpose, not just educational goals. .

Saving and investing for high standards

Me and my wife do save and invest more money for our daughter. We contribute most of our savings to a joint taxable investment account in both of our names.

Based on our current savings rate, we can pay for college out of pocket by the time our daughter starts her junior year without relying on her 529 plan.

Or we can pay for any other goal that we need to finance depending on what actually happens in our lives in the next 15 years. The only constant in life is change, so flexibility and choice are very important to us.

By investing heavily in our investment account, we are laying a foundation to provide for ourselves (down the road, when we retire) and our daughter (for whatever. home individual goals 15 to 20 years from now), regardless of whether a traditional college is in his future or not.

It is important to enjoy life even today

We want to maximize our family’s future financial position, which means prioritizing contributions to our tax-deductible investment account above all else – even if doing so means giving up some tax benefits.

It is also important for our family to enjoy life together today. Maintaining our savings rate target is our top priority; spending money on experiences that we value now are secondary.

That means we will choose to spend $500 on our daughter’s passion ballet class instead of putting that $500 into her 529 plan. after some expenses, that’s fine, but it’s icing on the cake rather than a requirement for us.

This is also the strategy I usually recommend to our wealth management clients: Yes, open and contribute to a 529 plan and take advantage of all its benefits. (That includes giving other family members, like grandparents, a special place to be directly involved in the child’s education if that’s important to them.)

But also save and invest aggressively in a tax-deductible investment account so you have the financial resources you’ll need in the future to support whatever life may look like down the road – and don’t miss out on very important experiences with your family today for you. of just adding more to the college fund.