Tis the season to be jolly…the season of gift-giving. You know what that means, your kids will receive tons of presents that they will only use once before you donate them or they end up in the dumpster. Call me a grinch or a party pooper, but I am just being honest. It is definitely a wonderful time of year but also a time to put on our financial savvy hats.  I feel as a society we spend so much money during Christmas and Chanukah that it can take away from our values. Most people buy objects that end of collecting dust after a while.

Others buy experiences which are great and I strongly encourage. However, that is not always feasible. Instead, I am going to recommend something different, an out of the box gift. This gift is simple to give, beneficial to both the child and parents, actually useful and is value driven. That is why I’m suggesting the the #1 gift you can give and encourage others to give your kid this holiday season is contributions towards their 529 plan.


Personal note: There are many strategies for saving for your child’s college/higher education. This is just one option that we are using for our daughter in addition to other means. 



What is a 529 plan?

A 529 plan is a tax advantage investment vehicle to be used for college savings. However, you can only withdraw money that you invest in an education savings plan for qualified higher education expenses or tuition for elementary or secondary schools without incurring taxes and penalties. 


Two Types of 529 Plans

1. Prepaid tuition plan

I strongly do not recommend this one because it does not include future room and board and does not allow you to prepay for tuition for elementary and secondary schools. 1


I do not like these because you can only use them for college and if your child goes to another school, you might lose all that savings. I would never want to put money towards something that could be lost. Who knows what your child will decide by the time they reach college. They may not even go to college.


2. Education savings plans

This plan is an investment account to save for the beneficiary’s future qualified higher education tuition, mandatory fees, room and board, and up to $10k per year can be used towards any public, private or religious elementary or secondary school. 1  I like this plan more because it allows much more flexibility because you aren’t locked into one university and can also use it for private undergrad if you want. 

Each state has its own type of education savings plan and you are able to select anyone. I encourage people to look into their own state’s 529 plan first since there might be income tax savings. For our daughter, we use the NY savings plan because we can deduct our contributions against our income tax. It’s an added benefit. If your state doesn’t offer any tax incentives, I know Ohio and Virginia have good savings vehicle and you do not need to live or work in either state, but do your own research on which state’s savings plan is best for you. I’d encourage you to look at ones that have low fees and allow you to invest in broad-based index funds. Meanings funds that track the market instead of expensive mutual funds.


Other Benefits

I like the 529 education savings plan because it grows tax-free and comes out tax-free if it’s for a qualified expense. As of 2019, you can contribute up to $15k a year per beneficiary. The other benefit is if your child receives a scholarship you still may be able to use it for other expenses like room and board, books, tech, and other items but check with your CPA  first. If you have money left over, you can change the beneficiary to yourself, another child, or grandchild. You can create generational wealth for education. However, before making any transfers, speak with your CPA to make sure you are doing it correctly.


In addition, many 529 plans offer links that allow you to easily email or text to family and friends. Once the contribution is made, the owner may receive an email confirmation of the gift. This makes it simple for them to contribute for holidays and birthdays and better than receiving a gift card that your child might lose.


That’s Great but How Do I get My Family On Board?

I know many of you might be thinking, I like this idea but it will never work with my family. My family is really into gift giving. I was in your shoes too. I admit there are some people that no matter how much you try to get them to contribute into a college fund, won’t. It’s just not in their DNA,  I’ve come to terms with this, but even getting two-three family members to invest is a win in my book.


 I usually start out by saying we really appreciate the fact that you want get something for our daughter. She’s fortunate to have a ton of stuff already, that’s why would  really appreciate if you could contribute to her education instead, even $10. It’s really important to us to make sure she has enough money for schooling in the future and we want to enforce the value of education by having her see others value it as well through gift giving.  If you still want to get her something small, she really loves (give example). 


Afterwards, I email the person the 529 link so they don’t have to think about. I’ve found this strategy usually works since it’ focuses on the value of education, which is hard for people to argue against, yet still allows them the opportunity to give an object as a gift if they choose. It’s a win-win all around.



As the holidays approach, I strongly encourage you to promote contributions towards your child’s 529 plan to friends and family. There is only so much “stuff” your child and you can handle. Teach your child to value education and not another gift that they only use once. Go against the grain and be different, your child will thank you for it later on.


Have you been able to get family members to contribute to your child’s 529 plan? Share in the comments below what has worked and what hasn’t? What barriers did you have to overcome?




  1. https://www.sec.gov/reportspubs/investor-publications/investorpubsintro529htm.html