Backpacks and Budgets: Smart Hacks for Funding Education

By The Lerner Group on September 4, 2025

Raising a family is one of life’s most rewarding adventures—and one of the most expensive. From daycare to summer camps, early education costs can snowball fast, leaving even financially savvy parents scrambling for solutions. But don’t worry, with the right strategy and a few clever hacks, you can make funding your child’s education much more manageable. Below are four often-overlooked options that can make a meaningful difference.

#1: Explore Your State’s Voucher Program, Universal Pre-K, and ESA

Many parents aren’t aware of the powerful tools built right into their state’s education policies. Here’s what you need to know:

• Private School Voucher Programs: These allow eligible families to access financial support for private school tuition. While traditionally geared toward underserved communities, several states now offer universal vouchers—giving all families more flexibility and choice.
• Universal Pre-K: A growing number of states—including Florida—are providing free pre-kindergarten programs to residents. States like Illinois and Michigan have plans rolling out soon, so keep your eyes peeled for implementation updates.
• Education Savings Accounts (ESAs): Think of ESAs as your tax-advantaged sidekick for everything from books to tuition—even room and board. Contributions cap at $2,000 per child annually and grow tax-deferred. Best part? You can set one up at your local bank in minutes. Just make sure to check if your income qualifies.

#2: Use a 529 Plan for More Than Just College

You might think 529 Plans are for college savings only—but these versatile accounts have leveled up.

• Since 2018, federal law has allowed up to $10,000 per year in tax-free withdrawals from 529 accounts for private, public, and religious elementary and secondary school tuition. (May vary by state). [1]
• In 2025, the law was expanded to raise the annual withdrawal limit to $20,000 starting in 2026, and broadened the list of qualified expenses to include materials, tutoring, test fees, and online education subscriptions. [2]
• Not all states have conformed to this updated federal law. To check your state’s specific rules, visit SavingForCollege.com.
• If your state does conform, it can be an excellent way to get state tax-free contributions, tax-free growth, and flexible educational use of the funds.
• High contribution limits and gift strategies make it perfect for grandparents or generous friends to chip in.
• Many platforms offer a QR code for donations, so loved ones can contribute instead of gifting another toy (and potentially snag a state tax deduction too!).

#3: Maximize Childcare Funding with DC-FSA

Here’s one smart tool that flies under the radar: the Dependent Care Flexible Spending Account (DC-FSA).

• Offered through employers, these accounts let you set aside money tax-free from each paycheck to cover childcare expenses.
• Contribution limits are currently $2,500 for single parents and $5,000 for couples. [3]
• Heads up: DC-FSAs are “use it or lose it” accounts, so budgeting is crucial. If the funds aren’t used by year-end, they disappear.

#4: Make Direct Tuition Payments to Reduce Estate Taxes

Here’s a powerful strategy that’s often overlooked—especially by families with taxable estates:

• Anyone (parents, grandparents, even family friends) can make direct payments to an educational institution for tuition expenses without it counting toward their annual gift exclusion or lifetime estate exemption. [4]
• This applies to private K–12 schools and colleges, and it’s one of the most efficient ways to reduce the size of a taxable estate while directly supporting a child’s education.
• These payments must go directly to the institution—not to the student or their parents—to qualify.

Pro Tip: Be willing to have the conversation. Many relatives are looking for meaningful ways to contribute and reduce their own estate tax exposure. This strategy can open up opportunities for everyone involved.

Navigating the costs of early education doesn’t have to feel like assembling IKEA furniture blindfolded. Whether it’s vouchers, tax-advantaged accounts, or smart gifting strategies, there’s a wealth of resources waiting to be tapped.

If you’re planning to have children, start saving early. Instead of spending on endless baby “necessities” (many of which will be rarely used), consider pre-funding child expense accounts like 529s or ESAs. You’ll be glad you did when tuition bills start arriving.

[1] https://my529.org/2025/07/federal-changes-to-qualified-education-expenses/

[2] https://www.kiplinger.com/retirement/retirement-planning/how-the-one-big-beautiful-bill-act-could-reshape-529-plans

[3] https://sponsor.fidelity.com/bin-public/06_PSW_Website/documents/FSRA_Dependent%20Care%20FSA.pdf

[4] https://www.irs.gov/businesses/small-businesses-self-employed/frequently-asked-questions-on-gift-taxes