American Funds ®

College Savings

Working Together to Help Assets Grow

Gifts from grandparents, godparents, extended family and friends, together with a systematic investment plan, can play a meaningful role in saving for college.

Saving for college can be a team effort. When you couple gifts from family and friends together with a systematic savings plan, it can make a meaningful impact over time. These hypothetical examples demonstrate the difference everyone pitching in can make.

The Potential Benefit of Working Together

  • Just You: You contribute $100 a month for 18 years with no unscheduled contributions. Assuming an 8% average annual return, you’d have $48,329 saved when the first semester arrives.

    $1,200 a year x 18 years @ 8% average annual return = $48,329
  • Working Together: You contribute $100 a month for 18 years with no unscheduled contributions. You also make two additional $250 contributions per year with gifts from birthdays and holidays. Assuming an 8% average annual return, you’d have $68,802 saved when the first semester arrives.

    $1,700 a year x 18 years @ 8% average annual return = $68,802

Spread the Word

By supplementing your systematic investments with gifts and contributions from family and friends, you could save an additional $20,000 for qualified higher education expenses.

  • Let friends and relatives know that they can contribute to a college savings plan that you have established.
  • Put aside money from holiday and birthday gifts for a college savings account.

Jump-Start Your Savings

Parents and grandparents seeking to put sizable amounts to work can make large lump-sum contributions to a 529 college savings plan. For example, married parents or grandparents can:

  • Contribute up to $28,000 per year to a loved one’s account without gift-tax consequences.
  • Under special election, combine multiple years into one contribution of up to $140,000 without gift-tax consequences.

To see how a sizable lump-sum contribution can grow, let’s assume a one-time contribution of $50,000. Assuming an 8% average annual return, your beneficiary’s hypothetical account value at age 18 would be:

  • $80,675 if he or she is currently age 12
  • $130,169 if he or she is currently age 6
  • $210,029 if he or she is currently a newborn

There is a separate contribution limit for each beneficiary; and gift-tax limits may be higher in the future.

Tax issues can be complicated. We encourage you to talk with your tax advisor or financial professional to learn more about making lump-sum contributions to 529 plans.

Please note that the examples shown in this article are for illustrative purposes only and not intended to portray actual results or represent an investment in a specific fund. Your results may differ.


Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.  

Before investing in any state's 529 plan, investors should consult a tax advisor. 

Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses , which can be obtained from a financial professional and should be read carefully before investing.   

Regular investing does not ensure a profit or protect against loss. Investors should consider their willingness to keep investing when share prices are declining.