I have a two year old and have a small 529 now for her but want to continue to invest for her college. I saw an article you wrote maybe a year or two ago and I didn’t get the impression you thought the 529 was a good investment. Do I have the correct understanding? If the 529 is not the best investment what are your suggestions.
Terry Says: Actually, quite the opposite. I am a big fan of 529 College Savings accounts and just posted a column suggesting them as one of the best holiday gifts for a child. But it is very important that you choose a plan that has a good investment track record and low costs. That’s why you should compare at www.SavingforCollege.com. Even if your state gives a small break on state income taxes when you make a 529 contribution, that can be offset by high fees and poor performance. And if you don’t want to do the comparisons, you can’t go wrong by using Vanguard’s 529 plan. Remember, you don’t have to use your own state’s plan — and the money can be used for college in any state.