A Parent’s Perspective on College Savings: The Power of 529 Plans

By Angela Bowman

Over the years, we have written many times about 529 plans and the importance of starting early. This past year, I have experienced the college planning process from a much more personal perspective. My son, Pierce, is a senior in high school, and our family has been busy researching and visiting schools, completing applications, writing essays, and anxiously awaiting acceptance letters and financial aid packages.

For those who have gone through this process, you know that it is exciting and completely terrifying at the same time. I often find myself questioning whether we have adequately prepared Pierce to navigate life independently, while also wondering whether we have saved enough to support his college choice.

When I became a parent in my mid-twenties, I was just beginning my career, with a first mortgage, student loans, and a modest income. While saving for college was something I thought about, it was not yet a financial priority. It was not until several years later that I opened a 529 plan and began contributing consistently.

In his college application essay, Pierce wrote a variation of the classic list from All I Really Need to Know, I Learned in Kindergarten by Robert Fulghum. While I believe many of those lessons still hold true, I would like to share a different list—one inspired by what I have learned during my time at Trust Company of Vermont. As an organization, we prioritize education and helping clients benefit from lessons learned through experience.

The following insights are things I wish I had known long before joining TCV, and may benefit you whether you are planning for the education of your children, grandchildren, or another loved one.

You don’t need to start big, but start early. 

As with all investing, time—not timing—is one of the most powerful factors in building wealth. Even modest contributions made early can have a meaningful impact. For example, contributing $100 per month from the birth of a child, rather than waiting until age five, can significantly increase long-term savings.

Assuming an 8% annual rate of return, waiting five years to begin contributing results in approximately $21,000 less in final value, despite only skipping $6,000 in total contributions. The power of compounding makes early action critical.

If you have the resources to go big, do it!

For those with the financial ability, 529 plans offer a unique opportunity to accelerate savings. You are permitted to “superfund” a 529 plan by contributing up to five years’ worth of annual gifts in a single year. In 2026, this amount is $95,000 per beneficiary.

If a 529 plan is fully funded at birth with no additional contributions and earns an average annual return of 8%, the account balance could exceed $379,000 by the time the beneficiary turns 18.

You can avoid paying taxes…. Sometimes.

529 plans offer tax-free growth similar to a Roth IRA when funds are used for qualified education expenses. For example, investing $5,000 annually over 18 years at an 8% return results in a balance of approximately $202,000. Assuming a 20% tax rate, investing those same funds in a taxable account could result in over $40,000 lost to taxes.

State-specific benefits can further enhance savings. In Vermont, if you are married filing jointly, you can receive a 10% tax credit for the first $5,000 contributed per beneficiary, up to $500. There are additional strategies to maximize this credit. 

According to the IRS website, the below are all true of 529 plans: 

• You can establish a 529 plan and name anyone as the beneficiary—including yourself.
• There is no limit to the number of 529 plans you may establish. 
• Changing the designated beneficiary to another qualifying family member does not result in additional tax consequences.

Using these provisions, a married couple with a newborn could establish three 529 plans—one for each parent and one for the child—contribute $5,000 to each and receive up to $1,500 in Vermont tax credits. Beneficiaries may be updated later as circumstances evolve.

Flexibility matters if college plans change

One of the most common concerns surrounding 529 plans is the uncertainty about continuing education. Fortunately, legislative changes have increased flexibility for those not wanting to go to college.

Funds may be used to: 

• Contribute to a Roth IRA for the beneficiary (up to $35,000, subject to rules – see the details in 
• Nathan Alexander’s companion article) 
• Repay student loans (up to $10,000) 
• Be withdrawn at any time, with a 10% penalty applied only to earnings

Additionally, beneficiaries can be changed to another child or qualifying family member if necessary. These options allow families to save confidently without fear that funds will be “trapped” if plans change.

And finally, my last lesson is less about finances and more about life….

Trust in yourself and in the foundational values you have instilled in your children.

Like many parents, I am extremely proud of my child and all that he has achieved. He was accepted to his top-choice college, and, according to campus tour guides, he is ahead of the game as he also does his own laundry. While seeing him off this fall will be an emotional milestone, I am comforted knowing that we have equipped him to make thoughtful decisions and to seek guidance when needed. This confidence gives me peace that he will excel in his college journey.

Planning for college, like most financial goals, is rarely about a single decision. It is about intent, consistency, and understanding the tools available to you. While no family’s circumstances are the same, thoughtful planning can create flexibility, confidence, and opportunity regardless of how the future unfolds. 529 plans remain one of the most effective vehicles for education savings, not only because of their tax advantages, but also because of their flexibility as goals change. 

The lessons I have learned, both personally and professionally, underscore the value of starting early, taking advantage of available resources, and revisiting strategies as circumstances change. These are principles we emphasize every day at Trust Company of Vermont, and ones we are proud to help families navigate as they plan for the next generation.