Dear Dave,

My husband and I are about to start Baby Step 5. We want to save money for college to help our children, but we’re a little worried about starting a 529 Plan and being penalized if we pull the money out for trade school or they don’t finish their studies. What do you think we should do?

Dani

Dear Dani,

You’d only be taxed on the growth, not what you put into the plan. And you’d be taxed on the growth anyway if you put it into something else, so there’s no reason not to go with a 529 Plan.

The truth is a 529 will work for a lot of trade schools. It may not be accepted if they do a straight-up apprenticeship, but it’s fine for a course of study at a vo-tech school.

Now, if you don’t use all of what’s in your 529 for education, the portion that goes unused will be taxed. You’ll want a chunk of cash sitting in your 529, enough to make a difference in their educational goals, but you don’t want to overfund it.

—Dave

* Dave Ramsey is CEO of Ramsey Solutions. He has authored seven best-selling books, including The Total Money Makeover. The Dave Ramsey Show is heard by more than 16 million listeners each week on 600 radio stations and multiple digital platforms. Follow Dave on the web at daveramsey.com and on Twitter at @DaveRamsey.