Gregory Clifford is Founder and CEO of The Clifford Group.
When it comes to planning for a child’s education, most people only think of opening a 529 savings plan after the baby arrives. But here’s the truth: You can do this even before a child is born—and the earlier you do, the greater the benefits.
A 529 plan is a tax-advantaged savings account that’s designed to help families cover education-related costs. The earnings grow tax-free, and they remain that way as long as withdrawals are used for qualified expenses like tuition, books, fees and room and board. These plans can also be used to pay for K-12 tuition, as well as registered apprenticeships and student loans.
I encourage clients who are even just thinking about having children to open a 529 plan in their own name or their spouse’s name as soon as possible. Later on, when your child arrives and has a Social Security number, you can simply and easily change the beneficiary to them without incurring taxes or penalties.
The Power Of Compounding
Starting early matters, of course, because of compound growth. The earlier your money is invested, the longer it has to grow, and in a 529, this happens completely tax-free. Even an extra three to five years before your child is born can make a big difference in how much is available when they head off to school.
Starting early also gives you more room to ride out market ups and downs. Early on, you can afford to put the account into aggressive investments, knowing you have two decades until the money is needed.
For high-net-worth families, an early start can also help with estate planning. Contributions to a 529 reduce your taxable estate, even though, as the account owner, you retain full control. Combine a bevy of grandchildren with fully funded 529s for each of them, and you have a meaningful legacy and a smart estate reduction strategy. Many parents and grandparents choose to make “annual exclusion” gifts, meaning they give up to the IRS annual limit without triggering the requirement to file a gift tax return. (In 2025, that is $19,000 per individual or $38,000 per married couple.)
Choosing The Right Plan And Strategy
Not all 529 plans are the same. Some state-sponsored plans are packed with benefits, such as state tax deductions or better investment choices, while others are more limited. It can make sense to use your home state’s plan, especially if it offers a tax break for contributions, but you don’t have to. Your first steps should be to research your own state’s offering and compare it to others, and consult a financial advisor if needed.
Front-load contributions if you can to maximize the power of compounding. You’re allowed to contribute up to five years’ worth of gift tax exclusions at once, which means $95,000 per person or $190,000 per couple in 2025. (If you do this, you’ll need to file a Form 709 with your tax return.)
Recent legislation has made 529 plans even more flexible. Thanks to the SECURE 2.0 Act, families can roll unused 529 funds into a Roth IRA for the beneficiary, tax-free and penalty-free, up to a lifetime limit of $35,000 if certain requirements are met. This means that even if your child doesn’t use every dollar in the account for college—maybe they get a scholarship, join the military or become an entrepreneur or NBA star straight out of high school—you now have a valuable backup plan.
As they say, the best time to start saving is yesterday, and the second-best time is today. This applies to 529 plans as well, even if you haven’t started shopping for a crib yet. Whether you’re expecting your first child or years away from even thinking about a family, you can open a plan now, make strategic contributions immediately and take advantage of every tax and growth benefit available. When the first tuition bill comes, you’ll be glad you planted the seed early.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
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