As kids head back to school, many families start thinking about the rising cost of higher education. Planning for college can feel overwhelming, but starting early and choosing the right college savings strategies can make a meaningful difference. With the right approach, you can balance flexibility, tax advantages, and growth potential to support your family’s goals.
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Here are three proven ways to save for college:
529 College Savings Plans
A 529 Plan is one of the most popular and tax-advantaged options for college savings. Contributions grow tax-deferred, and withdrawals for qualified education expenses are tax-free.
Many states even provide deductions or credits for contributions, making these plans appealing on both the state and federal level. For Texas families, there’s no state income tax, but 529s still provide powerful federal tax benefits.
Another advantage of 529s is flexibility:
- Funds can now be used for up to $10,000 per year in K–12 tuition.
- If your child doesn’t use all the funds, the SECURE 2.0 Act allows up to $35,000 of leftover 529 money to be rolled into a Roth IRA (subject to conditions).
- You can change the account beneficiary, so if one child doesn’t need the funds, they can be redirected to another child — or even a grandchild.
Contribution limits are generous (over $300,000 in many states, depending on the plan), making 529s especially useful for families who want to set aside significant amounts.
Starting early is key — the sooner you begin, the more time your contributions have to grow. For a deeper dive, see Investopedia’s guide to 529 plans.
Coverdell Education Savings Accounts (ESAs)
Coverdell ESAs have lower annual contribution limits than 529s, but they come with greater flexibility. Funds can be used tax-free for a wide range of qualified educational expenses, including K–12 costs.
If you’re looking for a supplement to a 529 or want the option to fund private school tuition before college, a Coverdell ESA can be a smart choice. Learn more about the details at the IRS ESA page.
Custodial Accounts (UGMA/UTMA)
Custodial accounts like UGMAs (Uniform Gifts to Minors Act) or UTMAs (Uniform Transfers to Minors Act) let you transfer assets to a child while still controlling how they’re invested until they reach adulthood.
These accounts offer flexibility—since funds can be used for more than just college—but earnings are taxable, and the child gains full control at the age of majority.
For a clear overview of how these accounts differ in structure and rules, see Saving for College’s guide to UGMA and UTMA accounts.
Finding the Right Balance with College Savings Strategies
No single approach works for every family. Effective college savings means weighing tax benefits, flexibility, investment growth, and family circumstances.
For example, a 529 plan might serve as the cornerstone of your savings because of its tax advantages, while a Coverdell ESA could be added for private school expenses during K–12 years. Meanwhile, a custodial account may provide flexibility if you want funds available for non-education needs.
Many families end up using a layered approach — pairing a 529 plan for long-term, tax-free growth with a smaller ESA or custodial account for shorter-term goals. The right mix depends on factors such as:
- Your child’s age and how many years you have to save
- Whether private schooling is part of your plan
- Your comfort level with tying funds exclusively to education expenses
- The need for flexibility in case your child’s path changes
The key is tailoring a savings strategy to your family’s situation rather than relying on a one-size-fits-all solution. To help you compare the options more directly, Charles Schwab offers a user-friendly, side‑by‑side breakdown of 529 plans, Coverdell ESAs, and custodial accounts — highlighting differences in tax treatment, contribution limits, and flexibility.
Final Thoughts on College Savings Strategies
Planning ahead for college expenses with solid college savings strategies helps position your family for greater financial flexibility when the time comes.
At Beckley & Associates, we partner with families across Plano, Dallas and North Texas to create tailored college savings savings and tax strategies that support both near-term education goals and long-term wealth planning.
Ready to explore your college savings options? Contact us today.
Disclaimer: This article is for informational purposes only and does not constitute legal or tax advice. Please consult with your tax advisor regarding your specific situation.