Are 529 Plans Worth It?

As the price of college continues to increase, people are looking for the most efficient way to save. Learn why so many people are turning to 529 plans.

November 20, 2020
Sootchy Team
Are 529 Plans Worth It?

No matter where you live or what field of study your child ends up pursuing, saving up for a college education takes a lot of time, effort, and – most of all – money. Given the huge price tag of a degree these days, the amount of each of these that’s needed to successfully fund a child’s future just keeps growing, so it’s understandable why so many parents ask what option would represent the best use of their energy and attention. As one of the most popular kinds of college funds out there, many families turn to 529 plans to help cover the cost of college, but are 529 plans worth it? For more on this topic, keep reading as the team at Sootchy discusses this question at length.

What Does a 529 Plan Cost?

When determining the worth of any financial product, including a 529 plan, it’s important to compare the costs and benefits of such a fund before committing money to one or more accounts. Here, we’ll consider what it takes to start a 529 plan so you can more easily answer the question: Are 529 plans worth it?


First, let’s look at what it costs – in terms of money – to open a 529 plan. Parents looking to start one of these college funds for their children have the option to browse plans in all 50 states, and depending on where you choose to open a 529 plan, it could wind up costing more or less money, both up front and over time.

That’s because different plans come with different minimum initial contributions and varying fee structures, two factors that should be carefully considered when picking a 529 plan. For instance, California’s 529 plan requires only $1 to start, and other plans have no minimum deposit at all; by comparison, South Dakota’s plan requires a $1,000 contribution when opening a plan, and one of Nevada’s plans requires $3,000 to start. Granted, this money will be going into the account, not into the state’s pockets – in other words, the money is being saved, not spent – but it can still represent a significant financial commitment.


The wealth of options offered to parents looking to start a 529 plan can be both a blessing and a curse. On one hand, you don’t have to settle for your state’s plan, but on the other, there are a ton of different college savings accounts to sort through, which takes time and a certain level of knowledge regarding how these plans work. For parents with busy lives or limited experience with saving or investing, the effort required to pick a 529 plan can make the task seem daunting, and even once a plan is picked, there are still a number of details to figure out, which can eat up time and energy you may not feel like you have.

What Are the Benefits of a 529 Plan?

Now that we’ve covered what it takes to start a 529 plan, let’s dive into their benefits and see how they stack up. For many families, the financial side of a 529 plan is the biggest determining factor, so we’ll start there.


Although you might think that 529 plans are costly, parents actually have tons of flexibility in deciding how much money they want to put toward a plan. If, for instance, you’d rather start out with small contributions, there are 529 plans that let you do that, and most of these plans also allow you to contribute what you want, when you want, so there’s no regular financial commitment required (especially if you pick a college savings plan instead of a prepaid tuition plan). Fees also vary from one plan to another, with direct-sold plans carrying lower fees than advisor-sold plans.

It’s also important to note that one of the greatest benefits of 529 plans is the tax advantage they offer. Most investment plans are taxed by both state and federal governments, but the gains in a 529 account are free from the federal income taxes that apply to other accounts, as long as they’re used to cover a qualified expense. On top of this benefit, many states offer their own income tax credits or deductions, making 529 plans even more financially advantageous.


Although the thought of sifting through the more than 100 college savings plans is enough to make even the most seasoned financial advisor heave a sigh, parents have a number of tools and services at their disposal that can make the process significantly easier. For example, a number of websites exist that can help you compare plans side-by-side.

For more comprehensive 529 services, check out the offerings at Sootchy, whose smartphone app can make it simple to find, open, and contribute to a plan, all from the comfort of your home. Working with Sootchy has the added benefit of placing a team of experienced 529 experts at your disposal, so if you have any questions or need help interpreting the nuances of a particular plan, you’ll have a resource you can turn to for quick answers.

Turn to the Experts at Sootchy for More on the Value of 529 Plans

There are plenty of reasons to consider 529 plans when looking at ways to save for your child’s education, which is why so many families use these tax-advantaged accounts to help their children get the degree they need to ensure a bright future. To learn more about 529 plans, including why they’re worth pursuing, visit Sootchy online or download our app today.



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