A father takes cookies out of the oven while his daughter looks on with excitement.
Personal finance

5 ways to maximize your college savings by year-end

Learn how to maximize your college savings by year-end, or review this checklist to ensure you haven’t missed anything.
5 minute read
December 07, 2022
Personal finance
Education savings
Saving for children
Tax tips

Maybe you’re still scrambling to find the perfect matching family pajamas and you haven’t baked a single cookie. Or maybe you’re wearing the same pajamas as your spouse, child, and dog right now, and you’ve already attended several cookie exchanges. Whether you're a procrastinator, a planner, or somewhere in between, this article offers you tips on education savings so you can maximize your year-end impact. 

Contribute to (or open) a 529 by the end of the calendar year
529 plan offers specific benefits—including tax incentives—to help you save for education. If you live in a state that offers a state tax credit or deduction for 529 contributions, you have until the end of December to make a contribution for the current tax year. If you’re not sure what state tax incentives you’re eligible for, use our 529 state tax deduction calculator.

All 529 account owners qualify for federal tax perks. Your earnings grow tax-deferred, and any withdrawals you make for qualified education expenses will be tax-free.*

*Earnings on nonqualified withdrawals may be subject to federal income tax and a 10% federal penalty tax, as well as state and local income taxes. The availability of tax or other benefits may be contingent on meeting other requirements.

Use Ugift®.
Many parents make saving for education a family affair—and there’s no better time to engage relatives and friends than during the holiday season. After all, a 529 contribution always fits, never goes out of style, and doesn’t have to be wrapped.

Ugift is a free service that allows others to directly contribute to your child’s Vanguard 529 Plan account with a unique code. As a 529 account owner, you can access your child’s Ugift code when you log in to your online account. Consider telling friends and family about Ugift when you’re asked what your child wants for Christmas, Hanukkah, or other special event.

Boost your 529 account balance with year-end bonus.
Consider allocating a percentage of your supplemental income, such as an annual bonus, to your education savings goal. Thanks to compounding, even a one-time contribution can boost your account balance over the long term.

Automate your savings through year-end (and beyond).
Most 529 plans, including The Vanguard® 529 Plan, offer automatic contributions from your bank to your 529 account. Setting up scheduled contributions can make it easier to save consistently— giving you peace of mind that you're making incremental progress toward one of your most important financial goals. 

There’s still time to set up automatic contributions and increase your total contribution for the year. Consider leaving your automatic contributions in place without a specific end date. Each year, you can revisit the amount you’re saving without interrupting any scheduled contributions.

Think about how you’re paying for education expenses this year.
Most families aren’t able to cover 100% of their child’s total education expenses entirely from 529 assets. That can actually be a good thing.

If you have to pay an education bill before year-end and you don’t use 529 assets to cover the expense, you may qualify for a federal tax incentive for higher education that can help offset your taxes. 

Make the most of what’s left of the year

It’s okay if you serve store-bought cookies and contribute to your 529 account at 11:59 p.m. on December 31. Whether it's sooner or later, you get things done this holiday season.

Now's the perfect time to start saving

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This information is general and educational in nature and should be considered tax and/or legal advice. We recommend you consult a tax and/or legal advisor about your individual situation.

All investing is subject to risk, including the possible loss of the money you invest.

For more information about The Vanguard 529 College Savings Plan, obtain a Program Description, which includes investment objectives, risks, charges, expenses, and other information; read and consider it carefully before investing. Vanguard Marketing Corporation, Distributor.

If you are not a Nevada taxpayer, consider before investing whether your or the designated beneficiary’s home state offers any state tax or other benefits that are only available for investments in such state’s qualified tuition program. Other state benefits may include financial aid, scholarship funds, and protection from creditors.

The Vanguard 529 College Savings Plan is a Nevada Trust administered by the office of the Nevada State Treasurer.

The Vanguard Group, Inc., serves as the Investment Manager for The Vanguard 529 College Savings Plan and through its affiliate, Vanguard Marketing Corporation, markets and distributes the Plan. Ascensus Broker Dealer Services, LLC, serves as Program Manager and has overall responsibility for the day-to-day operations. The Plan’s portfolios, although they invest in Vanguard mutual funds, are not mutual funds. Investment returns are not guaranteed, and you could lose money by investing in the Plan.

Ugift is a registered service mark of Ascensus Broker Dealer Services, LLC.