smart spending

12 days of financial gift giving

529 plan
529 plan

On the ninth day of Christmas, my true love gave to me, a 529 investment plan for college.

Given the rapidly rising costs of a college education, getting started on saving for it with a tax-advantaged 529 plan is a great way to start the new year.

"There are some limitations on them, but given that the baby boom generation was probably the least prepared to send their kids to college, anything that the next generation can do to send their kids to college, I say go for it. Because we really have undersaved; we have underprepared for the future," says Levine.

Enthusiasm for 529 plans waned a bit when investments took a dive during the recession. But Seaman says volatility simply requires closer management.

"Many 529 plans definitely have fixed-income choices ranging from a savings account to money market to CDs. All of those are 100 percent insured, and that's what people should be thinking about anyway as their child gets closer to college age," Levine says. "You need to be moving money out of stocks or mutual funds and into more stable investments because you don't want to experience a big drop in your 529 the year that you need to pay tuition."

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