When families discuss saving for education, the conversation typically centers on numbers – tuition costs, inflation, and monthly goals. But there’s more to it than numbers; it’s also about mindset.
It’s what behavioral economics calls mental accounting, the idea that people are more committed when money is set aside for a specific goal. When parents earmark funds for a child’s education, those dollars feel off-limits. This simple shift builds discipline and supports stronger habits like spending less and contributing regularly.
And the impact doesn’t stop with parents. When kids know their family is saving for their education, they’re more likely to pursue college and graduate, regardless of how much has been saved. It’s not about the balance – it’s about the belief.
And now, thanks to the SECURE Act of 2024, a law that greatly expanded the flexibility of 529 college savings plans, that mindset has real policy support. Families can now roll up to $35,000 of unused 529 funds into a Roth IRA for the beneficiary – tax and penalty free. The account must be at least 15 years old, and the rollover is subject to annual Roth contribution limits, but this is a significant win for families thinking long-term.
It removes the fear of overfunding and opens new doors for using education savings as part of a broader wealth strategy. The Act also allows 529 funds to cover K–12 tuition and student loan payments, making these accounts more useful than ever.
Together, these changes shift how we think about saving for education. It’s no longer limited to just covering college – it’s a flexible investment in a child’s future.
How are you making education a priority in both your budget and your mindset in this new era?