For instance, 529 plans have limited investment options and caps on the total allowed account balance. ESAs have an annual contribution cap of $2,000, as well as income limitations on those who contribute. Both accounts are intended to be used for college expenses only. As such, distributions used for other purposes usually incur taxes and steep penalties.
Alternatively, you can save to a low-cost brokerage account and absorb any annual taxes related to dividends and realized gains. You can still take a tax deduction for tuition expenses later, though you probably will end up paying more in taxes this way. The advantage is that you won’t have to worry about a plan B if junior decides not to go to college or gets a well-deserved scholarship. A taxable brokerage account also gives you the freedom to invest in whatever you want, which is not the case with a 529 plan.