$100 to one kid, $125 to the other. Contributed that amount every month I think since the oldest was 3 or 4 so the youngest 1 or 2 (when we started).
But most importantly had the Fidelity 2% rewards Visa which every month went right to the 529 (the one we contributed $100 to).
This was “invisible” to us and added tons over the years…sort of a stress free way to handle building up the account.
Of course, people should watch for fees too - we had Fidelity (NH) and Vanguard (Utah). I don’t think either is the cheapest but relatively low. Others are very high.
Even though my spouse and I were in our 30s before having a kid, we were in professions that get more payment in platitudes of our value than in actual dollars (public education teachers in the deep south). We couldn’t afford to put monthly amounts away in a 529 while we were paying for childcare, but we opened up a 529 anyway and put any monetary gifts from family in there. Once the kid hit kindergarten (public school!) we were then able to start putting money in there (about half the amount that we’d been paying for childcare…childcare years were very lean).
One thing to investigate is to see if your state has any incentives for investing in a 529. Some states will match up to a certain percentage, or will “gift” a certain amount every year if there is a certain amount invested each year, or there’s a tax credit (or tax deduction) for any investments in a 529. If there is any kind of free money available (whether as a tax credit/gift), I would do my darndest to try and get it.
As a general piece of financial advice, using raises or bonuses as additional investments is a great way to not feel the “pinch” of saving more, but can help to make the savings add up, for retirement and for 529s.
We started at around $300 per month, over 20 years ago. Minor increases along the way to about $400 per month.
Stopped doing monthly contributions in high school because my bonuses were sufficient to do lump-sum payments, but even without that I think we would have been fine with continued monthly payments.
As it is, because of good returns and kids getting some merit scholarships, our 529 is way overfunded (just sent off the last tuition payment for our youngest child).
I don’t expect either of my kids to go to graduate school, so it’s just an asset that’s available for the future for grandchildren (or us, with minor penalties if withdrawn for non-educational reasons). I have switched it over to higher growth investments, and we will see what it grows to.
if you liked the 529 think about having them start a Roth IRA when they graduate and continue to contribute. Similarly, these grow tax-free on earnings and the same time-value-of-money arguments apply.
Compound interest is truly the 8th wonder of the world. The dollars you and your graduates can contribute in their 20’s will grow tax-free for decades and form the core of retirement. Already, very few people still have a pension and we have to assume they will be gone by the time our kids retire so helping them start building a nest-egg now teaches good financial skills and has huge benefits given all that time to compound.
At 4-7% APR, every $10,000 invested at age 25 is $50,000-$150,000 at age 65 minus the effects of inflation. And in the Roth, none of it is taxable
We had the same, and had separate cards for personal and business expenses. We funneled everything through those cards, and auto-paid in full, so it was free money. That typically added a few thousand each year.
My spouse reminded me that we actually started ours when our son was five, not at birth as I had originally written. I stayed home with him for his first two years of life, so we were living on only one salary. Then, we were paying for a nanny for a bit when I returned to work, and we needed to rebuild our bank account. When he was five, we started putting away $800 per month in the 529.
Once our incomes recovered from parental leave, we put in the annual maximum allowed.
When each of my sons were born I started putting away $150 a month each in Maryland’s college investment plan (529). The older one will graduate this year from UMD using just the proceeds from that 529. He did go virtually the first year (COVID), so no room and board just tuition, but each year after it has fully paid for room and board also. It worked out as well as I could have hoped. I’m definitely a fan.
Sort of an aside, but I really believe that getting your kid started early on the idea of putting away some each year in long term savings is easily the second biggest financial gift a not-ludicrously-wealthy family can give a kid, after only a solid education. Definitely one of those teach a person to fish things that can change a whole life in the end.
The lifetime 529 to Roth IRA rollover limit is $35,000.
529 plan contributions (including earnings accrued on those contributions) made in the last five years cannot be transferred to a Roth IRA.
If the beneficiary makes any IRA contributions in a given year, the eligible 529 to Roth IRA rollover amount is reduced by the size of that contribution. For instance, if the beneficiary contributes $3,000 to an IRA in 2024, the eligible rollover amount decreases to $4,000, based on the 2024 total IRA contribution limit set by the IRS.
The rollover must be direct (e.g., plan-to-plan or trustee-to-trustee). You cannot take a distribution — a check — from a 529 and send it to a Roth IRA.
As I understand it, the kid will still need income to qualify, and since they cannot use the same annual limit twice, there is not necessarily any advantage to the kid for the parents giving them money to contribute out of a 529 versus a taxable account or parental income. It does let the parent sort of shift back some money to taxable from 529s, but that is not necessarily always going to be the preferred option for a variety of reasons as 529s have continued virtues for things like estate planning. So, the family might be better off just giving the kid normal money for the Roth contributions and keeping the 529s.
The other obvious issue is those rules about the account having to be at least 15 years old and the contributions/earnings over 5 years old might be a serious restraint for some families.
I had my financial advisor look over it, and his view after reviewing the state of the two plans for our two children (one way overfunded and the other taking transfers from the overfunded one), and the expected income for our two children, was that “keeping track of eligibility is more complicated than it’s worth”.
We have 529s for D25 and D30. We have saved quite a bit, and contribute $2.5k a month now, plus we use the Fidelity credit card rewards that someone mentioned upthread. We’re doing a lot but the market has made it grow significantly. I believe 1/3 of D25’s account is growth.
I know I’m a glass-half-empty kind of gal, but I will say 529 accounts are great because we’ve had the best stock market run in forever during the past 20 years. If that ever changes, then you can put whatever wrapper on your savings/investments you want, but we won’t have the same results as we’re having now. 529s are working because the market is B, B, B-a-n-a-n-a-s.
