New and Expecting Parents: Plan Now for Future Financial Needs
Expecting a baby can be one of the most exciting times in life! It’s also the perfect opportunity to consider and plan for future financial needs, including those of higher education costs. The Education Plan®, New Mexico’s 529 college savings plan, provides an opportunity to save for future education costs. If you start early, when your child is born, the power of compounding goes to work for you. Investing, as with many things in life, benefits from an early start.
Evaluate Your Budget
Even before your child is born, you can start planning for the future. Every person’s individual budget and needs will vary. What is important is to capture necessary or mandatory costs within your budget and determine how much you might be able to set aside and contribute to future savings. Reevaluating your budget periodically is important, especially when new life changes occur, like expecting a new baby.
Prioritize Saving
Investing early may also help develop disciplined spending and savings habits. According to the CSF 2022 State of College Savings Survey, 65% of all parents were saving for their child’s higher education; and 46% of all parents had saved at least $5,000 per child. Additionally, 29% of all parents are saving in a 529 higher education plan; and three-quarters of those parents are saving through recurring – annual, quarterly or monthly – contributions. Focus on your budget, cut expenses where possible and turn extra funds into additional contributions to savings, such as your 529 plan(s). One of the best ways to save for higher education is to open a tax-advantaged 529 education savings account with The Education Plan. It requires no minimum contribution and can be opened at any point in your child’s life – even at birth. It’s never too early to start saving for higher education costs. You can minimize the need for future debt for you and your child for higher education needs with a 529 plan. Qualified withdrawals and contributions are free from federal income tax, and earnings are compounded, so your investment grows as your child grows. For those who live in New Mexico, you may also deduct your contributions to your 529 account with The Education Plan from your state income tax if the money is used to pay for qualified education expenses.
Contribute Regularly
The sooner you start saving for future education costs, the more options your child may have when they reach college age. 529 plan savings may also reduce your need to borrow and incur debt for higher education costs. Apart from the tax advantages, The Education Plan makes it easy to contribute. You may open your account with The Education Plan with any amount and contribute as much or as frequently as you like or are able. You may contribute lump sums, such as year-end savings, tax refunds, bonuses, or inheritance; or contribute more regularly through automatic withdrawals from your paycheck. Another way to save money now for your child’s future higher education expenses is to inform grandparents, friends, and other relatives that they can also to add to the fund. The Education Plan, allows for easy gift-giving using Ugift. You can provide family and friends with your unique Ugift code that they can use to contribute to your account quickly and easily.
Stay Up-To-Date on Rising College Costs
College costs generally rise year over year. Regular contributions from you and your loved ones will help to keep up with the rising costs by saving now. Over the last 10 years, published in‐state tuition and fees at public four‐year universities increased at an average rate of 2.2% beyond inflation, according to the College Board. The average total cost of college for a full‐time, in‐state student at a public four‐year university is over $27,000. The funds in a 529 education savings account can be used to cover a variety of education expenses, such as tuition and fees, room and board, textbooks and required technology. These “qualified education expenses” can be used at 4-year colleges and universities, community colleges and technical schools, and more, as long as your child is enrolled part-time.
To learn about The Education Plan® visit The Education Plan.
Frequently Asked Questions
A 529 plan is a tax-advantaged investment account that is designed to grow savings for future education expenses for a specified beneficiary. 529 plans offer unique benefits and features that make them an appealing strategy for education related saving.
A 529 plan can be used for “qualified educational expenses.” For federal tax purposes, qualified educational expenses include:
- Tuition and fees at accredited higher education institutions
- Books
- Supplies and equipment
- Room and board for beneficiaries attending on at least a half-time basis.
- Computer technology, equipment, and internet access
- Up to $10,000 a year for K-12 tuition and expenses (Limit increase to $20,000 in 2026)
- Expenses for educational special needs services
- Transfers to an ABLE account for the beneficiary (transfer subject to annual limit)
- Apprenticeship expenses
- Up to $10,000 for student loan repayment
- Credentialing expenses and certification programs
- Roth IRA rollover for the beneficiary
If you're not sure if an expense is considered "qualified," we recommend consulting with a tax professional or advisor. Unqualified expenses will be treated like ordinary income: state and federal taxes will apply, with a 10% federal penalty for withdrawals from your 529 plan used to pay for them.
New Mexico residents can deduct contributions to The Education Plan from their state taxable income each year. This includes contributions made to an account that you are not the account owner of.
You cannot deduct contributions from federal income taxes.
Any person at least 18 years old with a valid Social Security Number (SSN) or Tax Identification Number (TIN) can open a 529 account. The account holder chooses the investment options, designates a beneficiary, and requests the distribution of funds.
The cost of college continues to rise, including tuition, housing, food and supplies, so it’s important to begin saving as soon as possible. You can learn more about how much a typical college education costs on our Cost of College page. It’s never too early or too late to start.
The Education Plan offers a variety of investment options to fit you and your family’s needs, risk tolerance and goals. You can see all of the available investment portfolios on the investments page.
Yes, you can use up to $20,000* a year to cover tuition and expenses for K-12 education.
Qualified K-12 expenses include:
- Tuition (public, private, and religious)
- Curriculum materials, books (including digital/online) and instructional materials
- Tutoring and instructional classes**
- Fees for a nationally standardized norm-referenced achievement test, an advanced placement examination, or any examinations related to college or university admission
- Dual enrollment program fees
Educational therapies for students with disabilities provided by a licensed or accredited practitioner or provider, including occupational, behavioral, physical, and speech-language therapies
*Starting in tax year 2026. The annual limit is $10,000 in tax year 2025 and permitted for tuition only.
**Tuition for tutoring or educational classes outside of the home, including at a tutoring facility, but only if the tutor or instructor is not related to the student and—
(i) is licensed as a teacher in any State,
(ii) has taught at an eligible educational institution,
or (iii) is a subject matter expert in the relevant subject.
You can open an account with The Education Plan online or by mailing in the enrollment form. In order to open an account, you will need the following information:
- Your social security number or TIN
- Your address
- Your bank account information (in order to fund the account)
- The beneficiary’s social security number or TIN
- The beneficiary’s birthday
-The beneficiary’s address
