529 Plans vs. Savings Accounts: Which is Right for You?

With tuition costs on the rise, saving for college can seem a bit overwhelming. However, at Equity Bank, we believe that the earlier you start and the smarter your strategy, the more manageable it becomes.

Whether you’re planning for a newborn, a teenager, or even contributing as a grandparent, understanding your options is the best way to save for a child’s future and to build a college fund that can carry your student all the way through commencement.

College Savings Account vs. 529 Plans: Where to Start

When families begin exploring how to save for college, one of the first decisions is whether to use a 529 plan, a traditional savings account, or a combination of both.

A 529 plan offers long-term growth through tax-free investment earnings, but it comes with rules around how funds can be used. Saving for college with a high-yield savings account, by contrast, provides complete flexibility (you can access funds at any time for any purpose), but interest earnings are taxable and typically grow more slowly.

As Andrew Musgrave, Managing Director of Trust and Wealth at Equity Bank, explains, “529 plans have restrictions on distributions, whereas savings accounts don’t, and 529 plans grow tax-free, whereas you have to pay taxes on interest earned in a savings account.”

For many families, the best approach isn’t choosing one over the other. Instead, it’s combining both — using a 529 plan for long-term growth and a savings account for short-term flexibility or unexpected needs.

For those looking for a simple, accessible place to start, Equity Bank’s Simply Savings account offers a reliable foundation.

What Are 529 Plan Benefits in 2026? (And What Happens If Plans Change)

For many families, however, 529 plans remain one of the easiest and most effective ways to save for college.

Musgrave puts it simply: “The sooner you fund it, the more it can grow. As long as you use it for qualified expenses, the distributions are tax-free.”

Even without a federal tax deduction, this accelerated tax-free growth makes 529 plans extremely appealing.

529 plans are also more flexible than many people realize. 529 plan funds are earmarked for “education expenses,” which include private K-12 education. You’re also not limited to your home state’s plan — families can invest in whichever option best fits their needs.

“Plans from any state can be used in any state,” Musgrave notes. However, state tax deductions in 2026 do vary. For example, Kansas allows a $6,000 deduction for joint filers and $3,000 for single filers, while some states offer no deduction at all.

Another concern families often have is what happens when plans change. Luckily, if your loved one doesn’t use all — or any — of the funds, you can still access them.

“There is now an option to roll some of the funds, up to a maximum, into a Roth IRA with no penalty,” Musgrave explains. This creates the opportunity for unused education savings to continue growing tax-free into retirement.

Families can also change the beneficiary, use funds for another dependent, or even carry the account forward for future generations. This flexibility helps ensure that the money continues to serve a meaningful purpose, even if college isn’t the right option for the intended recipient.

What About Other Account Types?

In addition to 529 plans and savings accounts, some families consider custodial accounts, such as UGMA or UTMA accounts. These accounts allow assets to be held in a child’s name and can be used for a wide range of expenses beyond education.

That flexibility can be useful, but it comes with tradeoffs. UGMA and UTMA accounts don’t offer the same tax advantages as 529 plans, and because the assets legally belong to the child, they may affect future financial aid eligibility. The assets are also transferred into the beneficiary’s control, irrevocably, at the age of majority (18 or 21, depending on the state).

For this reason, they are often used as a supplemental tool rather than a primary college savings strategy.

How Much Should You Save Each Month?

Regardless of which account type you choose, setting clear savings goals and sticking to them is the best way to build up a solid foundation for education. There’s no exact universal number for every situation; consistency matters far more than precision.

Starting with a manageable contribution (like 5 percent of your income) and increasing it over time is often more effective than waiting to contribute larger amounts later. Even small, steady deposits can grow significantly with enough time, provided the accounts being used to hold them bear interest.

Automating your savings can make this process much easier. With tools like Equity Bank’s AutoSave feature, contributions happen automatically in the background, helping you stay consistent without having to think about it. This type of automated college savings approach turns a long-term goal into a sustainable habit. 

Involving Grandparents in College Savings

College savings are often a shared effort, and grandparents can play a meaningful role in accelerating progress. Passing on the fruits of your efforts doesn’t have to wait. In fact, it’s often more beneficial to start early.

Musgrave shares an example of a client who “decided to frontload the 529 for each grandchild as they were born. Because of certain liquidity events, he was able to fund the maximum for five years all at once. This $150,000 contribution at the birth of the grandchild now has decades to grow.”

Not every contribution needs to be that large, of course. Grandparents can participate in many ways, from occasional gifts to regular contributions. The key advantage is time — when funds are added early, they have more opportunity to grow.

From Saving to Wealth-Building

Saving for college is often the first step in a broader financial journey. Over time, many families begin to think beyond simply setting money aside and start focusing on how those funds can grow and support multiple goals, especially after graduation.

That shift — from saving to wealth-building — comes from understanding how interest, compounding, and long-term planning work together. Equity Bank offers helpful insights on making that transition, as well as dedicated experts from our Trust and Wealth Management team, who can help align college savings with a larger financial strategy.

When Is the Best Time to Start Saving?

If there’s one consistent takeaway, it’s that time is one of your greatest advantages.

“As always, due to the compounding effect of investing, the earlier and more often you can contribute, the more you should have in the future,” says Musgrave.

Starting early doesn’t require a large initial investment; it simply gives your savings more time to grow and adapt alongside your goals.

Get Started Today

Saving for college in 2026 is less about finding a single “perfect” account and more about building a strategy that evolves over time.

A 529 plan can provide long-term, tax-advantaged growth, while standard savings accounts can offer flexibility when plans shift. The key is to use every tool available, like automated contributions or family support, to help maintain consistency and momentum.

When these pieces work together, saving becomes more manageable and more impactful. The earlier you begin, the more flexibility you create — not just for education, but for your family’s broader financial future.

Our Financial Review Process

To ensure you receive the most accurate financial information, this guide was developed in collaboration with:

Andrew Musgrave | Managing Director of Trust & Wealth, Equity Bank

Our Commitment to Accuracy: At Equity Bank, we are dedicated to providing trustworthy financial guidance. This article has gone through a thorough review process, with our editorial team working alongside industry experts to confirm the accuracy of all financial information. We ensure content reflects current market conditions and regulatory standards as of 2026.