Definition
A state-sponsored education savings account. Money grows tax-free and withdrawals are tax-free when used for qualified education expenses; many states add a tax deduction or credit for contributions.
Why it matters
College costs compound faster than inflation, and a 529 is the most tax-efficient way to get ahead of them. Starting early matters far more than contributing large amounts.
Example
Parents contribute monthly to a 529 from a child's first birthday. Contributions may earn a state tax break, the balance grows untaxed for 17 years, and withdrawals for tuition come out tax-free.
Related terms
This definition is educational, not financial, legal, or tax advice. U.S. rules and limits change; verify time-sensitive details with official sources. See our disclaimer.