Is It Too Late to Open a 529 Account for Your Child in 2024?

If you have a child in middle school or high school and you haven't saved any money for college, you might wonder if it's too late to open a 529 account in 2024. The good news is: It's not too late!

No matter what age your child is or how much money you've saved for college, there is almost always an opportunity to improve your situation by opening a 529 account. And depending on where you live, you might even get a tax deduction on your state income taxes.

Let's look at why it's a good idea to open a 529 college savings account for your child -- at any age, with any amount of money in the bank.

529 college savings accounts: Not just for babies

So often with 529 college savings plans, the advertising features babies and young children. As if every new parent is supposed to have thousands of dollars lying around to set up a college savings fund. Lots of people are living paycheck to paycheck, and the median American savings account is only $1,200. If you feel like you can't afford to save for college, you're not alone.

Saving for college can be especially difficult during the early years of parenthood, when you might be paying for extra expenses like child care. Young parents who are just getting started in their careers can also struggle to save; if you're at a stage of life where you're not making much money, it's hard to save for retirement -- let alone for college.

But sometimes, just as children grow up and get better at taking care of themselves, parents' personal finances get better. You might be able to start saving more money after your children get old enough to be out of daycare and in full-time school. Your career prospects might improve. You could get pay raises and promotions, get a better job or switch to a better-paying field, or start side hustles or a small business. Just because you can't afford to save for college when your child is 2 years old doesn't mean you'll still be in the same situation 10 years later.

For all these reasons, it's important to keep in mind that it's almost never too late to open a 529 plan, even if your child is 10 years old, 12 years old, or already in high school. You still have time to make a meaningful difference in helping pay for your child's future college costs.

How much you can save for college for a high school freshman

Let's say you have a child who is a freshman in high school and you haven't saved any money for college so far. You open a 529 plan and save $300 per month for the next four years. Let's assume you invest your 529 savings in a diversified portfolio of stocks and bonds that deliver an average return of 6% per year. After four years, you'd have $16,694 saved for college.

How saving for college can reduce your state income taxes

Putting money into 529 savings plans is not the same as a 401(k) or traditional IRA -- the contributions do not give you a deduction on your federal income taxes. But if you live in a state with income taxes, some of those states offer a tax deduction for 529 contributions. Check the rules for your specific state; for example, contributing to California's 529 plan does not provide any state tax deduction.

In my home state of Iowa, parents (or other 529 account owners, like grandparents) can deduct 529 contributions of up to $4,028 from their Iowa adjusted gross income for 2024, per beneficiary account. That means an Iowa family with two parents and two children could save a total of $16,112 for their two kids' college funds in 2024 ($4,028 per parent, per child) and deduct that full amount on their Iowa state income tax return.

This state income tax advantage makes it even more worth it to save for college, even if you got a late start.

Ready to catch up on college savings? Start here

If you want to know where to get started with a 529 plan, check out CollegeSavings.org, a website from the National Association of State Treasurers. This site has details on what you need to know about 529 plans, and its Find My State's 529 Plan tool will help you find the right 529 program for your state.

Some states will only let you invest in 529 plans directly through the state's program (called "direct-sold" savings plans); using your state's direct-sold plan is often the best option, especially if you want low fees and state income tax deductions. Other states also let you invest in 529 plans through a financial advisor or brokerage. Many leading brokerages offer 529 accounts, including Schwab, Vanguard, and Fidelity, to help families save and invest for college.

Bottom line

Kids grow up too fast, and the future costs of college can feel overwhelming. But if your child is still in school, it's not too late to open a 529 plan. Even if you only have a few years left before your child graduates from high school, you still have time to save and invest for college. And you might get a break on your state income taxes, too!