A 529 plan gives consumers a tax-advantaged way to pay for education, and it’s a boon for parents and other family members who want to save for a child’s education. A 529 plan offers several other benefits, including the ability to invest with potentially high-yielding assets like mutual funds, instead of being limited to low-yielding bank accounts.

Among other things, “these plans can be used as estate planning tools by grandparents to help their grandchildren save for college, or by a family to create a relatively flexible educational trust that can span multiple children with proper planning,” says Bill Van Sant, CFP, senior vice president at Girard, a wealth management firm in the Philadelphia area.

Here are nine major benefits of one 529 planes and why this plan may be right for you and your family:

1. Tax-free growth for education

A 529 plan gives you a tax-advantaged way to save for education. You can save money after tax and then grow it tax-free. When you withdraw the money for qualified educational expenses, you also pay no tax on the winnings. But you have to be careful to use the money exclusively for the items that meet the rules of the plan – otherwise you will have to pay penalties.

The restrictions on distributions are one of the main disadvantages of 529 plans.

2. Investment options with potentially high returns

Depending on the plan you choose—each state has its own options—you can invest in mutual funds and other market-based investments. It gives you the opportunity to earn great returns on your contributions and the potential to beat the skyrocketing costs of college.

That kind of opportunity, if used properly, can far surpass saving in a bank account.

3. Any tax credits for contributions

If you invest through a 529 plan, you can even get one tax deduction on your state income tax. However, not all states offer a tax break on your contributions, and you won’t get a tax break in a state where you don’t pay taxes. So choose carefully.

4. Two 529 plan types

It’s often overlooked, but the 529 plan has a lesser-known option. The two types of 529 plans include:

• A savings plan for education which allows you to open an investment account that can be used for future educational expenses, including tuition, room and board, books, and other costs specifically related to the educational program.

• A prepaid tuition program allows you to purchase future college credits at current prices, although they are only available at participating institutions and are not available to K-12 schools.

Consider which plan type works best for your needs.

5. The beneficiary can be changed

A 529 plan gives you a lot of flexibility about who can use the plan and when, says Van Sant.

“Parents can change the beneficiaries on a 529 plan if the originally designated child chooses not to attend college,” he says.

But you can also use the same 529 plan for multiple children. For example, if your children are not in college at the same time, the beneficiary can be changed after the first child graduates and the plan can be used for the second child. But it probably makes more sense to simply set up a 529 plan for each child.

You are not required to close the account when a child graduates or opts out of college.

“529 plans can hold assets indefinitely as long as a living beneficiary is listed,” says Van Sant. “This means that an original beneficiary can change their mind and go back to school later in life, or they can have children of their own and name those children as the new beneficiaries of the plan.”

But you can even name yourself as the beneficiary and use the money if you go back to school.

6. 529 plans aren’t just for college

While 529 plans are generally associated with university education, they can also be used for private elementary and high schools. So if you pay tuition for grades K-12, you can also benefit from a 529 plan. The expansion of the program came about as part of the 2017 Tax Cuts and Jobs Act.

The new rules also allow the use of 529 plan distributions in apprenticeship programs. Apprenticeships are now considered a qualified higher education expense if the apprenticeship is registered and certified with the US Department of Labor.

7. 529 plans can be used to repay student loans

The 529 plan was further expanded in 2019 by SECURE Act. Now a 529 plan can be used to pay off up to $10,000 in the beneficiary’s student loans as well as up to an additional $10,000 in student loans for each of the beneficiary’s siblings.

8. A 529 can be rolled over into a Roth IRA

The The SECURE Act 2.0 made a big change to how a 529 plan can be used, and it’s especially relevant for those who are afraid of contributing too much that they won’t be able to use the money. Beginning in 2024, a 529 plan can be rolled over to a Roth IRA for the account’s beneficiaries.

But there are some important details as well. The account must have been opened for at least 15 years, and the transfer is limited to the maximum annual Roth contribution. Rollovers are limited to a lifetime maximum of $35,000. The full details of the plan are still being worked out for the 2024 launch. But that’s even more reason to open a 529 plan sooner rather than later.

9. Anyone can contribute to a child’s 529 plan

While parents are most likely to contribute to a child’s 529 plan, other family members can also legally contribute to the plan. It includes close relatives such as grandparents, aunts and uncles as well as those who are less closely related. In fact, anyone can contribute to a 529 plan and name the child as a beneficiary, either through your own plan or one owned by someone else.

How to get started with a 529 plan

It can be easy to open a 529 planand you can start a 529 directly through a specific state’s plan or through a broker. You can start a plan with any state, but before you open one, you need to do some research.

“Before choosing a 529, investors will want to evaluate a 529’s investment options to see how those investments have performed,” says Van Sant.

Be sure to look at what investment options are available and how much they cost. Good investment options allow you to maximize your potential returns and minimize your costs.

“Additionally, investors will need to compare and contrast investing in their own state’s 529 plan versus investing in another state’s 529 plan, as there are usually tax advantages associated with investing in their home state 529,” says Van Sant.

A financial advisor or a site such as Save for college can also help you choose a program that fits your needs. It’s worth watching Bankrate’s list of the best 529 plans to see if one suits you.

“Once you’ve decided which 529 is best for you, setup and financing are pretty seamless,” says Van Sant.

Bottom line

A 529 plan is a great ally when it comes to saving enough to pay for the rising costs of college, but an even greater ally is time, as it allows you to grow your earnings. Combine the two by starting a 529 plan today and you can roll together a nice package when it’s time to go to school.