The Importance of College Savings: An Open Letter to My Kids About 529s

To my kids,

I've been quietly building something on your behalf since before you could walk. It’s called a 529 savings plan, and it’s one thing I believe will genuinely change your lives for the better.

At Paidly, I spend every day helping people navigate the financial realities of education, debt, and long-term savings. Being able to pay outright for college instead of borrowing for it is a huge deal. I’ve seen what happens when people graduate carrying serious debt: they delay buying homes, pass on dream careers for higher paying ones, and spend their 20s digging out of debt instead of building for the future. That's a big part of why I opened your 529s – I didn't want that for you.

Opening these accounts was one of the most important financial decisions I made as your dad. A 529 savings plan lets your future be chosen by you, not dictated by debt.

But what is a 529? Let me tell you a bit more about them.

529s Are an Investment in Your Future

A 529 is a savings account built specifically for education expenses. You put money in and it grows completely tax-free (which might not be exciting to you right now but it’s very exciting to me). That means when you want to take the money out for college, you’ll owe nothing in federal taxes.

Let’s say I put $5,000 into a 529 the year you were born and it grows around 7% each year. By the time you're 18, you’ll have roughly $17,000 in savings (that’s $12,000 for just sitting there!). A regular investment account would send some of that money to the IRS, but a 529 doesn't. And it grows bigger the longer the money is in there, which is exactly why starting to save early matters so much (which is good advice for all savings, by the way).

Another great thing about it is that many states offer a tax deduction for contributions — meaning grandma and grandpa can help you build it up without losing any money to taxes.

One of the things I realized while building Paidly is that people want to help their loved ones build a better future, they just need an easy way to do it. That’s why we crowdfund your 529: to give your family and friends the ability to invest in your future during birthdays, holidays, and other milestones.

They Can Be Used on Much More Than College

Maybe you’re thinking you don’t want to go to college, and that’s okay, too. College might not feel like the right path for everyone, and if you decide it’s not the right path for you, there are still ways a 529 plan can help your career.

The current rules for 529s let you use them on apprenticeships and trades, as well as continuing education and training courses. That probably doesn’t sound exciting right now, but some of the things you’ll need to do to maintain your job can be pretty expensive (and not all employers cover those costs for you). That’s why it’s important to have your own savings.

Here's the current list of what 529s can cover:

• K–12 private school tuition
• College tuition, fees, housing, and meal plans
• Curriculum materials like textbooks, workbooks, and digital tools
• Apprenticeships and vocational training
• Graduate and professional school
• Student loan repayment
• Career credentialing and professional licensing

Whether you go to a four-year university, pursue a trade, get licensed in something, or take a nontraditional path entirely, there's almost certainly a way your 529 can help pay for it.

Roll It Into Retirement or Build Generational Wealth

So I know retirement is a long way away for you, but I’m gonna tell you this next part anyway.

If there's money left over in your 529 after your education is done, you can put up to $35,000 toward retirement tax-free. $35,000 sitting in a Roth IRA at 22 grows to roughly $520,000 by the time you’ll retire. Your college fund becoming a foundation for your retirement is a pretty remarkable thing (one day, you’ll probably think so, too).

And if you don’t end up using all of it or wanting it for retirement? Say you earn a scholarship, or choose a path that doesn’t cost a lot for education, or somehow strike it rich, we can transfer the savings to another family member or even save it for your kids someday.

It’s a Gift From Me to You

I started 529 accounts so your 20s can belong to you: to take risks, chase things that excite you, and build on solid ground instead of digging out from debt. And I started Paidly to make that same tool easier to use for other people as they create more financial stability for the future.

529s are more flexible and more powerful than they've ever been. So take advantage of all a 529 can help you with, ask me anything about it, and open one for your own kids someday way earlier than feels necessary, just like I did for you.

Love you both, Dad