How to Start Saving for Your Child's College or Career Training

For many parents, the single biggest expense of their lives, after buying a house, is financing a child’s college education. The cost of attending a four-year college or university varies widely, depending on whether a student attends a public or private institution. For Vermont’s high school class of 2025, the in-state cost of tuition, room and board can range from $25,000 a year to attend Vermont State University to the mid-$30,000s to attend the University of Vermont — or $95,000 a year to attend Columbia University in New York City.

If those figures leave you with sticker shock, you’re not alone. According to a 2024 survey from College Ave, a student loan provider, fewer than half of all parents with a child in a four-year degree program felt financially ready beforehand to pay for a college education.

But Vermont parents don’t have to navigate those uncertain waters alone. In 1965, the Vermont Legislature created the Vermont Student Assistance Corporation, a public nonprofit whose mission is to help families and students of all ages save, plan and pay for college and other career training. Notably, VSAC administers Vermont’s 529 program, which is a valuable investment tool for helping students and families reach their career goals.

To find out more about those accounts, Kids VT sat down with VSAC president and CEO Scott Giles, who has led the organization since 2013. “I used to say that the 529 program is one of our quiet success stories, but it’s not so quiet anymore,” he said; the program currently handles more than 29,000 accounts and $700 million in investments. As he explained to Kids VT, it’s never too soon to start saving.

“Any money you save is money you don’t have to contemplate borrowing.” Scott Giles

How does VSAC help Vermonters pay for college or career training?

Our goal at VSAC is to help people become better consumers of education, so that they’re able to make good program and institution choices that align with their values and financial abilities. A 529 plan becomes a really important tool for giving you a broader range of options when you’re navigating those choices. Any money you save is money you don’t have to contemplate borrowing, and in the future it may be the difference between affording one institution over another.

What is a 529 plan and how does it differ from other types of investments?

The 529 plan is named after the section of the federal tax code that allows you to make contributions into an account and have those earnings accrue tax-free and not be taxed when you withdraw them for your child’s education. Vermont also offers a tax credit on the contribution side. That means the state will give you a 10 percent tax credit on the first $2,500 you contribute to a 529 account per child. And if a couple can afford to invest more, it’s $2,500 per taxpayer.

What can a 529 plan be used for?

Oftentimes when people think of a 529 plan, they only think of traditional college expenses: tuition, room, board, books and computers. But in the last few years the program has been expanded to allow a 529 plan to also pay for certificate programs, apprenticeships, training expenses associated with pursuing the building trades and even paying down up to $10,000 in student debt. So it’s a very flexible tool for investing in a child’s future career.

What if my child decides not to attend college?

The 529 funds cannot be used for things outside the education sphere. However, if a child decides to not go to college but goes into the military instead, you can continue to hold those funds for that beneficiary, because at some later date they may decide to pursue college or career training. And there is no age limit as to when 529 funds must be used. I’m navigating this with my own son, who is 29 and was in the Army infantry and just got out. He is now looking to pursue a career in nursing.

You can also change the beneficiary of the 529 plan. Let’s say you have more than one child, and one of them decides to not attend college. Or you have an exceptionally gifted student or athlete who gets a full scholarship and doesn’t need that money for college anymore. One option is to redesignate that account for another child. So the money isn’t lost. And a 529 plan can be used to support schooling or training anywhere in the world. As of January 1, 2024, as much as $35,000 in unused funds can be rolled over, penalty-free, into a Roth IRA, with certain restrictions.

Different states have their own 529 plans, and you don’t need to live in a state to invest in its plan. Are there benefits to investing in a Vermont 529 plan?

When people are looking at a 529 plan, they should consider all the fees and tax benefits. The 10 percent state tax credit on the first $2,500 per child is only available to Vermonters if they use the Vermont 529 plan. So that plan is usually going to be the best option for Vermonters.

Are there other benefits to using a 529 plan to save for college versus other forms of investments?

A 529 plan is treated relatively favorably in the federal needs analysis when families apply for financial aid, in a way that other financial instruments are not. There’s a complicated formula when the federal government looks at your eligibility for aid: First they consider your income, then they look at the assets owned by the child and the parents. An asset owned by the child is assumed to be available for education, whereas parental assets are assumed to have different demands. The 529 account is treated as a parental asset. So it has a smaller impact on your aid eligibility than other financial assets and may help you qualify for more assistance.

How should parents balance saving for a child’s education versus saving for their own retirement?

Every family’s situation is different, and as a parent, you need to make sure you’re taking care of your own future, too, because you can’t borrow money for retirement. With 529 plans, there are some creative things you can do, knowing that even with small dollar amounts, when they’re allowed to grow over time, they can have a big impact.

One example is rethinking how families celebrate birthdays and holidays. Say your child is about to celebrate their first birthday. Rather than putting a bunch of money into toys or clothing, consider splitting the gift amount in two, so that half goes into a material present, and the other half goes into a college savings plan.

Can relatives and friends contribute to your child’s 529 as well?

Yes! The 529 plan is an opportunity for them to support and reward a parent who is going to be invested in helping their child pursue the career that will be most fulfilling for them, both personally and financially. It’s also a really powerful way to help children think about their own future. Even small amounts saved can have a profound impact on the likelihood that that child will successfully pursue college or career training after high school. It’s like members of their family are saying to them, “We believe in you, and this is an option that we think is an important investment in your future.”

Does the value of a 529 plan fluctuate, like market-based investments, or does it accrue interest at a fixed rate, like a savings account?

Families participating in the 529 plan have a range of options to choose from, all of which are associated with how much risk they’re comfortable assuming. One option is called “interest only,” which is not going to fluctuate in value. You get an interest rate-based return on your investment over time. Another option is a 100 percent stock index fund, which rises and falls with the market.

What most people do, however, is our age-based investment plan. It’s designed to take away some of that worry. You put your money in, then tell the system when the beneficiary is going to graduate high school or when they’ll need to access the funds. So, if you have a 1-year-old child with an 18-year time horizon, early on that investment mix will be much more heavily invested in equities, to take advantage of what the stock market offers. But as you get closer to the period when you’ll be withdrawing those funds, the funds get reallocated into more bond funds and fixed-income options, which have less volatility.

What if people don’t have much money to set aside for their child’s future?

Oftentimes people will focus on the high cost of a college education and feel badly that they can’t save as much as they’re being told they’ll need. But saving is a learned habit, for you and your child, and no amount saved is too small. K

Free 2-Year degree

Vermont students in the classes of 2025 and 2026 can earn a free associate’s degree at the Community College of Vermont, thanks to a grant from the J. Warren & Lois McClure Foundation. Students who complete their high school coursework by grade 11 and are accepted in the Early College program at CCV can continue for a second year for free. Want more details? Attend a virtual info session about the program on March 25 or an in-person session on April 1 at CCV in Montpelier; on April 17 at CCV in Winooski; or on April 29 at CCV in Brattleboro.

Find more information at sevendaysvt.com/early-college-free-degree

Find more tips at mymoney.vermont.gov.

This article was originally published in Seven Days’ monthly parenting magazine, Kids VT.

The original print version of this article was headlined “Funds for the Future | As the cost of higher ed rises, it’s never too early to start saving for college or career training”