Utah governor Gary Herbert signed a declaration officially proclaiming September as College Savings Month in the State of Utah. The Utah Educational Savings Plan (UESP), Utah’s 529 college savings program, is encouraging parents, grandparents and other family members to prepare and save for a child’s higher education.
Read about Utah’s 529 savings plan here.
This article over at The Street caught my attention today.
It suggests that the recent market downturn shows 529 plans are inherently flawed. I disagree.
It’s true that the investing time frame for college savings plans is shorter than retirement. So investing everything in risky stocks until a year or two before college is not a good idea. But most 529 plans offer “target date” funds that gradually shift to less risky investments as your kid or grand kid get closer to college.
Consider that, when you child is born, you have about a 20 year investment window. It would be silly to invest in a CD or other low rate security for 20 years. You need to understand that you can lose money, but not be so conservative that you miss out on spectacular tax benefits and earnings.
As millions of students head back to campus this fall, parents across the United States are thinking about how to pay the college bills. That means a renewed focus on 529 plans for everyone.
If you haven’t set up a 529 plan for your child or grandchild yet, start by doing your homework. 529s.com lists all states’ 529 plans and will help you understand the fees, tax breaks, etc.
College Savings Iowa has reduced asset-based expenses on its 529 college savings plans. The 13 Vanguard investment options in the plan will see their fees reduced from 0.52% to 0.50%. That may not seem like much, but it’s $5 per $1,000 invested annually. If you’ve accumulated $50,000 in your account, that’s a savings of $250 per year.
This is the second time in three years the plan has reduced its expenses.
A report released by Sallie Mae last week shows that 52% of parents are “saving the same amount or more” for college despite the down economy. The report continues:
In fact, 62 percent of parents of college-bound children are saving for education, trailing only retirement as a savings priority. Fourteen percent of parents reported saving the most for their children’s college, second to 27 percent who save the most for retirement. For nearly half (46 percent) of parents, saving for college ranks in their top three savings priorities.
It amazes me how many people are able to set aside savings for college but don’t want to invest in a 529 plan right now because of “market conditions”. Those market conditions have pushed the market higher three months in a row, and people have missed out ona 25% gain.