As the back-to-school season kicks into gear, savvy parents have a fresh, powerful tool in their financial arsenal: expanded 529 college savings plans, thanks to the recent “One Big Beautiful Bill Act” signed into law. Yet, despite these enhanced benefits, a surprising number of families are still missing out on what could be a game-changer for funding education and beyond.
The 529 Plan: Underutilized but Undeniably Powerful
A recent Vanguard survey reveals a startling trend: nearly 69% of parents are parking their children’s education funds in traditional checking or savings accounts, while only 10% tap into 529 plans. Among younger generations, the numbers are even lower—just 8% of millennial parents and 6% of Gen Z parents use these plans. This is a critical oversight given the potential growth and tax advantages that 529 plans offer.
Why does this matter? The national average interest rate on a checking account is a meager 0.07%, and savings accounts barely do better at 0.39%, per FDIC data. Contrast this with 529 plans, which historically yield average annual returns around 7%. For example, a modest monthly contribution of $250 could grow to over $96,000 in 17 years—enough to cover a significant portion of college costs or vocational training.
What’s New? Expanded Eligible Expenses
The recent legislation broadens the scope of what 529 funds can cover, making these accounts far more versatile. Beyond traditional college tuition, room, board, and textbooks, parents can now use 529 withdrawals for:
- Vocational and credentialing programs (think welding, HVAC, cosmetology)
- Professional licensing and exam prep (law, accounting, finance)
- Continuing education for maintaining certifications (real estate agents, nurses, teachers, financial advisors)
- Expanded K-12 expenses such as tutoring, standardized test prep (SAT, ACT, AP exams), and educational therapy
This expansion means 529 plans are no longer just for college-bound kids. They can support a wide range of educational paths, including trade schools and lifelong learning—an important shift in a world where career pivots and skill upgrades are increasingly common.
Why Investors Should Reconsider Their Education Savings Strategy
The tax benefits of 529 plans are compelling: contributions grow tax-free, withdrawals for qualified expenses are tax-free, and many states offer tax deductions or credits for contributions. This triple tax advantage is rare and should be a cornerstone of any education savings strategy.
Moreover, the flexibility to cover K-12 expenses and vocational training means families can tailor their savings to fit their child’s unique educational journey. This is especially relevant given the rising costs of alternative education paths and the growing importance of certifications in today’s job market.
Introducing Trump Accounts: A New Player in Child Savings
Starting July 2026, the new “Trump accounts” will allow parents to contribute up to $5,000 annually in after-tax money for children under 18, with employers able to add $2,500 more. Newborns from 2025 to 2028 will receive a $1,000 federal seed contribution—a no-brainer for parents looking to jumpstart their child’s financial future.
However, these accounts come with restrictions: funds can only be withdrawn after age 18 and will roll into a traditional IRA, subject to taxes and penalties if accessed early. This contrasts with 529 plans, where withdrawals for education remain tax-free, and excess funds can be transferred to a Roth IRA (up to $35,000), enabling continued tax-advantaged growth.
What Should Investors and Advisors Do Now?
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Reassess Education Savings Vehicles: Given the expanded uses of 529 plans, advisors should revisit client portfolios and educate families about the broader utility of these accounts. Encourage contributions beyond just college tuition to include vocational training and K-12 expenses.
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Maximize Tax Benefits: Investors should explore state-specific tax incentives tied to 529 contributions. Some states offer substantial deductions or credits that can enhance the overall return on investment.
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Plan for Flexibility: With the evolving landscape of education, advise clients to maintain flexibility in their savings plans. 529 accounts now serve a wider array of educational needs, making them a versatile tool for diverse family goals.
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Consider the Trump Account as a Supplement, Not a Substitute: While the new Trump accounts offer an attractive initial government contribution, the limitations on withdrawals and tax implications suggest they should complement, not replace, 529 plans.
Looking Ahead: The Future of Education Funding
Education funding is no longer a one-size-fits-all proposition. The diversification of eligible expenses within 529 plans reflects a broader shift toward personalized education pathways. According to the National Center for Education Statistics, enrollment in vocational and certificate programs has grown by 20% over the past decade, underscoring the importance of flexible savings options.
At Extreme Investor Network, we see this as a pivotal moment for families and advisors alike: those who adapt their strategies to leverage these new tools will be best positioned to support their children’s educational and career success in an increasingly complex world.
Actionable Tip: If you haven’t reviewed your education savings plan in the past year, now is the time. Consult with a financial advisor to explore how the expanded 529 plan benefits can align with your child’s evolving educational goals. And if you’re a parent of a newborn, mark your calendar for the 2026 Trump account rollout—free seed money could be a valuable head start.
Stay ahead of the curve with Extreme Investor Network—where your financial future gets the expert edge it deserves.
Source: Trump’s ‘big beautiful bill’ expands 529 savings plan expenses