A father takes cookies out of the oven while his daughter looks on with excitement.
Investing for life events

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
November 12, 2021
Investing for life events
Education savings
529 Education savings plans
529 Pre-paid college savings plans
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 perhaps you’re wearing the same pajamas as your spouse, child, and dog right now, and you’ve already participated in several cookie exchanges. Either way, this article offers year-end tips on college savings for procrastinators, planners, and everyone in between.

Contribute to (or open) a 529 by December 31, 2021.
529 college savings 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 December 31, 2021, to make a contribution for tax year 2021. 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 their birthday, Christmas, Hanukkah, or other special event.

Boost your account balance with your year-end bonus and final Child Tax Credit payments.
Consider allocating a percentage of your supplemental income—such as an annual bonus or Advance Child Tax Credit payment—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 College Savings Plan, offer automatic savings, which transfers money directly from your bank account to your 529 account on a regular schedule. This free service makes it easy 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 for 2021 and increase your total contributions 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. The American Opportunity Tax Credit (AOTC), The Lifetime Learning Credit (LLC), or the tuition and fees deduction can help offset your 2021 taxes. (See our latest research for tips about college spending.)

Make the most of what’s left of 2021

It’s okay if you serve store-bought cookies and contribute to your 529 account at 11:59 p.m. on December 31. You get things done—and thanks to you, this time of year is magical.

Now's the perfect time to start saving

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

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

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

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 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.