What is a 529 plan?

A 529 plan is an education savings account that helps families set aside money for college and other eligible education expenses. People are drawn to 529 plans for three key reasons:

1. Tax advantages — earnings grow tax-deferred, and qualified withdrawals are tax-free.

2. Flexibility — funds can be used for various education and training paths and adjusted if plans change.

3. Control — you (the account owner) decide how and when funds are used.

You open an account, name a beneficiary (the student), and contribute over time. Two important points: starting early, even with small contributions, makes a big difference, and a 529 works best alongside other resources like scholarships and financial aid.

Key benefits

Tax-deferred growth: Investment earnings grow without annual taxation while in the account, meaning your money works harder for you.

Tax-free withdrawals: When used for qualified education expenses, withdrawals are tax-free at the federal level (and often state level too), giving you a real advantage over regular savings accounts.

Education flexibility: A 529 supports college, vocational programs, graduate school, and other qualified expenses. If plans change, you have options.

Pair your 529 with credit union savings

While a 529 handles the tax-advantaged investment side, many families benefit from maintaining a credit union savings account alongside it:

• High-yield savings accounts hold funds for near-term expenses (books, room and board, tech)

• Money market accounts offer flexibility for unexpected education-related costs

• Regular savings accounts work for smaller contributions or non-qualified expenses

This two-account approach gives you both tax efficiency and flexibility.

Common myths

"My child will get a scholarship, so I don't need to save."

Scholarships help but rarely cover everything. Having a backup plan, whether through a 529 or dedicated savings, protects your family.

"If my child doesn't go to college, I lose the money."

You have options: change beneficiaries to another family member, use funds for other education pathways, or explore other strategies. Your credit union can help you think through your specific situation.

Ready to start?

• Research your state's 529 options — Each state plan has different features and investment choices. College Savings Plan Network has a helpful search tool.

• Talk to your credit union — They can help you think through how a 529 fits into your overall savings strategy.

• Start small — You don't need a large amount to begin. Regular contributions add up significantly over time.

This guide is educational. For specific tax or investment advice, consult a tax professional or financial advisor.