College savings: This holiday season’s perfect gift

Is your family calling you for kids’ gift ideas? Point them toward your child’s 529 plan.

College savings: This holiday season’s perfect gift

Time to read: 2 min

The holidays are nearly here again, and many new parents will be fielding the first of many requests for gift ideas for their young children. From grandparents, aunts and uncles to godparents and family friends, there’s no shortage of loved ones looking to brighten your child’s holiday with a standout present. Are you ready with a good answer? You won’t see it advertised in your Sunday paper circulars, but I believe this season’s most extraordinary gift is also the most enduring one — the lifelong gift of a college education.

Think outside the (toy) box

Now more than ever, we’re seeing the proverbial “Christmas creep,” with retailers introducing seasonal merchandise and decorations well before you’ve had a chance to plan your Thanksgiving menu.

In fact, Halloween had hardly gone by before I received an email promoting this year’s hottest toys. Curious, I opened the message and realized the first four items listed were $349, $129, $114 and $99 apiece. Wow! When did “toys” get so expensive? As a parent myself, I know all too well that this year’s trendy toys are often worn out or outgrown by the next year — and at prices like these, that’s not a pleasant prospect!

This holiday season, why not look beyond the expensive toys and steer family and friends toward a gift idea your child can enjoy for years to come: a contribution to a 529 college savings plan.

The basics of 529 plans

Named after Section 529 of the Internal Revenue Code, the 529 savings plan was created to help families set aside funds for future college costs. Earnings grow federally tax-free and are not taxed when the money is taken out for use at an eligible college, university or institution of higher education, including vocational schools.

If a child decides not to attend college or earns a scholarship instead, funds can be redirected to another family member. (Another option: If the student receives a scholarship or attends a US military academy, the scholarship amount or cost of attendance can be withdrawn from the 529 plan account without the 10% federal penalty tax on early withdrawals. That said, earnings are still subject to any other applicable taxes, including federal income tax.)

For parents, one of the primary benefits is that anyone can contribute to a 529 account, and there is no minimum contribution required. For this reason, many parents have started suggesting college savings contributions as a gift option for their children. My wife and I were recently invited to a birthday party for a 1-year-old. The invitation included a line that said, “Any cash will be contributed toward Emma’s college savings fund!” I thought that was a nice approach. Rather than specifically requesting that we give cash, the invitation simply let us know that the parents were thinking about college savings already, and the account they’d set up made it easy to contribute.

The bottom line for parents? This year, skip the trendy toys and point your friends and family toward your little one’s college savings account. They’ll appreciate the opportunity to make a meaningful difference in your child’s future by giving a gift the child can’t wear out, break or outgrow. For parents, that’s the making of a truly happy holiday.

To learn more about opening or contributing to a 529 college savings account, contact your financial advisor and visit

Important information

Blog header image: Julia Sudnitskaya/

Thomas Rowley

Director, Retirement and Education Strategies

Thomas Rowley is director of retirement and education strategies and one of Invesco’s most frequently requested speakers. He provides analysis of the evolving retirement landscape and develops actionable strategies to help investors and financial advisors maximize their retirement-planning opportunities. Mr. Rowley regularly shares his insights online at in addition to his speaking engagements.

Mr. Rowley’s insights reflect more than 20 years of experience in the investment industry. He translates his comprehensive knowledge of retirement planning into lively, clear explanations of the complexities of legislative, investing, tax and social issues.

Mr. Rowley shares his analyses of retirement-related issues through regular personal appearances, continuing education webinars and Web-based commentaries.

Mr. Rowley has been director of retirement business strategy since 2010. Prior to joining Invesco in 2010, he was in charge of individual retirement plan products and Retirement Marketing at Van Kampen.

Prior to joining Van Kampen in 1996, he was a 401(k) regional sales director with an investment firm. His experience also includes seven years in retirement plan operations and three years as head of a brokerage firm’s retirement help desk. He began his career in the Treasury bond futures pit at the Chicago Board of Trade.

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