529 plans are a smarter way to save for school. 

With this type of investment account, account holders can grow their savings over time with tax-free earnings on contributions, and make tax-free withdrawals for a variety of education expenses, including college costs, K-12 tuition, fees for vocational training, and even student loan repayment. Anyone can open a 529 plan and designate anyone as the account beneficiary, but 529 plans are most commonly opened by parents on behalf of their children. 

But despite these attributes, fewer than a quarter of Americans have a 529 plan. Moreover, misconceptions about 529 plans are exceedingly common, and half of Americans don’t even know what a 529 plan is.

One promising path to closing this gap in awareness and adoption: workplace benefits. And offering perks that enable workers to reap the rewards of 529 plans can pay off big time for employers, too. 

Here’s what HR leaders should know about 529 plans:

Saving for college is parents’ top financial goal. 

Parents rank saving for their kids’ college as their top financial goal — scoring higher than even retirement savings or homeownership.  

And while the typical family expects to cover around two-thirds of their kids’ college expenses, they’re only on track to have reached an average of 27 percent of that goal by the time their kids graduate high school.  

The presence of a 529 plan can greatly improve the trajectory of families’ college savings. Compared to parents without a 529 plan, 529 owners are on track to cover 15 percent more of their anticipated contribution to their kids’ college costs with savings, and 529-owning parents are also much more likely to have a financial plan in place to reach their college savings goal than parents who don’t have a 529 plan (88 percent vs. 50 percent). 

College savings goes hand-in-hand with other critical financial wellness concerns.

For tens of millions of US households, student debt is a top barrier to both day-to-day financial stability and long-term savings goals. And with the average borrower taking more than twenty years to pay off their student loans, it’s no surprise that many parents are torn between paying off their own student debt and saving for their kids’ school; 30 percent of parents with student debt haven’t started saving for their kids’ education. 

This conflict rings especially true for Millennials. 80 percent of US adults born between 1981 and 1996 will become parents by 2026, and as the generation with the highest rate of student debt, Millennials will continue to face unique challenges when it comes to balancing their financial priorities. 529 plans help make parents’ top financial priority more achievable — and now that Millennials represent the largest generational demographic in the US workforce, benefits that help employees with children save for college are all the more relevant. 

529 plans promote inclusivity and equity.

An inclusive financial wellness program is one that enables all workers to improve their financial health — no matter their background or goals. 

529 plans are most commonly known as a tool to help parents save for their kids’ college education, but because 529 plan terms are flexible in nature, they can make an impact in a variety of scenarios.

Any adult can open a 529 plan and designate anyone as the beneficiary — even themselves, allowing employees to build tax-incentivized savings for their own education. And 529 plans can fund much more than just college expenses; per IRS guidelines, qualified withdrawals can include those to cover costs related to eligible vocational and trade schools, K-12 tuition, and even up to $10,000 in student loan repayment.

529 plan benefits can also promote greater equity in workplace financial wellness programs by making it easier to save for school, and therefore helping to close the racial disparity in college savings and affordability. 

College students of color are more likely than white students to face a gap between what their families can contribute and the cost of attendance. They’re also more likely to take out student loans, borrow more, remain in debt longer, and struggle more to keep up with payments; this continues the cycle of inadequate college financing, with Black and Hispanic parents’ college savings goals for their children more likely to have been hindered by their own student debt.  

A racial gap exists in 529 plan adoption, too: among families who save for their kids’ education, just 17 percent of Black families utilize a 529 plan, compared to 31 percent of white families.  

Reduce employees’ financial stress — today and tomorrow.

529 plans make it easier to save for educational expenses — and offer a major stress reliever for the 70 percent of parents who feel financially unprepared to pay for college.

This creates a domino effect of improved financial wellness outcomes, many of which will continue to drive positive impact for years to come.

By helping families cover more educational expenses with savings, 529 plans can also help reduce the burden placed on other family funds. With 68 percent of parents using their own income to pay for college costs, 529 plans could lead to greater day-to-day financial stability when the time comes to send their kids off to school. Even more critically, 529 plans could also help more parents stay on track for retirement: roughly 4 in 10 parents who are saving for both retirement and college have made early retirement withdrawals to pay for a child’s college tuition, and 58 percent say these competing financial goals will force them to delay retirement.

For many families, increased college savings via a 529 plan could also eliminate the need to take on Parent PLUS Loans. These federal loans are lent to parents to help fund a child’s college education, but all too often, leave families strapped with high-interest debt that takes decades to repay.

For employers, this all adds up to a less financially stressed, more productive, engaged, and loyal workforce — now and for years to come. 

Candidly can help.

529 plans drive meaningful impact for employees and employers alike. 

Our 529 Plan Finder makes it easy for employees to discover and compare 529 plan options, then select and enroll in the plan that’s right for their needs. And because this tool is part of our Core platform, employees access it alongside features and services that address every step of their financial wellness journey — from repaying student debt to saving for the future, and everything in between.