Can I Contribute To My Godchild’s Education Savings Fund?

If you’re looking for ways to contribute to a loved one’s future success, the good news is there are plenty of options. One of those ways is contributing to a child’s education fund. 

Here’s a look at how you can contribute to a godchild’s education savings fund and what to know.

Can I contribute to my godchild’s education savings fund?

The short answer is yes. If you’re looking to help someone get off on the right financial foot by helping them save for college, you don’t have to be related to the person or live in the same state. You have plenty of options when it comes to helping a godchild — or even a niece or nephew — save money for their future.

Before you get started, it helps to know what account options are available and when they’re most useful. 

Types of education savings accounts 

1. 529 plan

A 529 plan is one of the most popular plans for education savings. A 529 plan is a tax-advantaged savings plan that allows you to contribute to and pay for education-related expenses. In recent years, 529 plans have expanded their offerings to include student loan repayment, apprenticeship programs and the ability to convert unused funds into a Roth IRA.

Any contributions to the account grow tax-deferred. This means that the money you contribute can be withdrawn tax-free as long as it’s used for qualified education expenses, such as tuition and fees, room and board, and textbooks for universities. Sometimes this can include technical and vocational schools and other qualified institutions as well. 529 plans can now also be used to pay for K-12 tuition at private schools and apprenticeship programs.

Anyone can open an account and contribute to it.  Parents, grandparents, godparents and even other relatives can all open and contribute to the account. If you wanted to, you could even fund your own educational expenses this way.

Here’s how it works: The participant deposits after-tax money into the account. Then, the money in the account can grow tax-deferred and then be tapped tax-free for relevant expenses. Depending on the state, you might not even have to be the owner of the account to claim a tax deduction for your contribution.

2. Coverdell education savings account

A Coverdell education savings account is similar to a 529 plan, with more flexibility for investments but stricter rules on contributions. You can only contribute up to $2,000 annually per year until the recipient turns 18. While the account grows tax-free, there is no tax deduction for contributions. Distributions from a Coverdell ESA are tax-free for qualified K-12 and college educational expenses.

The Coverdell has income limit requirements, unlike a 529, so that’s also important to keep in mind.

3. Roth IRA

Another option is opening a Roth IRA on behalf of the godchild (or other recipient). Most people associate a Roth account with retirement, but it can also be used for education savings purposes.

In 2025, the annual limits for Roth IRAs are $7,000 for those under 50 years of age and $8,000 for those aged 50 or older. Those contributions can grow tax-free, and you can withdraw up to the amount you’ve contributed with no taxes or penalties.

Contributions made to a Roth IRA are made with post-tax income, meaning you can withdraw the money with no taxes or penalties. If you use the earnings from this account for qualified education expenses, like books, tuition or fees, you can avoid the 10 percent early withdrawal penalty. The earnings are still subject to income tax, though. 

People who choose the Roth IRA route for education savings usually have a few goals in mind (think saving for college and retirement at the same time) and want the flexibility that comes with a Roth IRA.

4. Life insurance

Permanent or universal life insurance might not be the most common way to save for college education, but setting a policy up for a child does work for some people.  With these life insurance policies, you’ll have a cash value account and the death benefit available to the insured. That cash value grows tax-deferred at a relatively low but guaranteed rate.

If your policy grows enough, you can basically take a loan out against the cash value to pay for education. This loan can affect the other half of the policy, though (the death benefit). Have a financial professional — like a financial advisor — chat with you about whether another college savings option might be better. 

5. Brokerage account

Brokerage accounts may be one of the easiest ways to fund a loved one’s education, and they take minutes to set up. The accounts don’t give you a tax break, but they do give you more control over the investments and the account. 

You’re also not restricted to just using the account for education-related expenses. Brokerage accounts can be a good way to build wealth for a variety of things, like retirement, buying a home and other financial goals. 

Here are some of the best brokerage accounts for 2025.

How to choose the right account for you 

Choosing which option is best for you and your loved one depends on what your long-term financial goals are. Also consider your recipient’s time horizon ahead of graduating from high school and/or preparing for college. 

Before opening any of these accounts, sit down and think about which ones most align with your investment goals in order to maximize tax efficiency.

If you aren’t sure where to start, it’s best to consider speaking with a financial advisor who can not only help you set up goals, but also plan and manage these accounts for you if needed. 

Bottom line 

If you want to contribute to a godchild’s or loved one’s education savings, you have a ton of options. Consider which type of plan or account aligns best with your investment strategy, as well as how to maximize your savings and tax efficiency.