Parents Are Ditching 529 Plans to Invest in Bitcoin as a College Savings Vehicle

To help their children get ahead financially, families are putting their money into cryptocurrencies as a college savings plan despite the risk and volatility.

Families are putting their money into cryptocurrencies as a college savings plan despite the risk and volatility.

Some are putting their children's college savings into Bitcoin, hoping to beat inflation and rising tuition costs.

Others say stock gains aren't good enough, while some financial advisors say it's a fair way to diversify.

Bitcoin's value has increased by over 500% from the "crypto winter" low, and many believe the OG token's ascent is far from over.

After trading hands for less than $16,000 in November 2022, the world's largest cryptocurrency finally crossed the $100,000 threshold in December last year and is hovering around that level.

Some parents say their children have enough time if they start early to weather Bitcoin's extreme volatility and still make large returns to fund their children's college.

Bitcoin experienced a revival in interest and investment last year with the launch of Bitcoin exchange-traded funds.

The asset's recovery has been highlighted by its surge subsequent to President Donald Trump's election and his embrace of the industry as a whole.

Distributing a portion of a child's assets to Bitcoin could align with specific ideas of traditional financial responsibility, even though most financial advisors would not recommend full investment in Bitcoin.

Investors with longer time horizons may afford to take more risk, says Stanford's Initiative for Financial Decision-Making head Annamaria Lusardi, who also suggests using a small number of cryptocurrencies in a diversified portfolio.

For first-time investors, she recommends the tax-free and easy-to-understand Roth IRA.

Cryptocurrency is helping some parents save even more for education. One year at a prestigious private university can cost up to $100,000, so investing in regular stocks won't cut it.

The same is true for Alex Crognale, a professional soccer player.

This 30-year-old knew he wanted to do everything he could to aid his wife's financial situation after she had her first child last year.

On the other hand, Bitcoin appeals to him as a more versatile kind of wealth than the standard 529 plans, whose returns in the past have disappointed him.

My daughter was born 2 weeks ago. I’m NOT opening a 529 savings acct for her. Here’s what I’m doing instead:In addition to stacking bitcoin, we are opening a brokerage account that will serve as her primary savings vehicle. What would you buy to hold for the next 18 years?…

When invested in a 529 plan, residents of many states can deduct their state income taxes, put the money to grow tax-deferred, and then withdraw it tax-free for higher education expenses.

However, crypto does not come with any such advantages.

Moreover, even crypto-sceptical parents may find it challenging to dissuade their children from engaging with the asset class. Bitcoin has attained such popular status that their children may already be aficionados, influenced by the enthusiasm of their friends.