Investing 102

[pw2006]

Originally Posted by LS1-IROC

Wow..lots of good reading here!

I'm curious as to what the best way to save for college is. My wife and I have a little one on the way and want to start right away saving for their college fund. I'm wondering if a 529 plan is better or should I just buy big company stable stocks?

I live in CA and have 2 little ones (2 and 5). I set up 529s out of Utah when they were born (Utah has one of the lowest fee structures and there are no tax benefits using a CA 529). There are some limitations and/or penalties with 529s if the funds are not used and/or withdrawn (like if you overfunded the acct, kid decides not to go to college, life throws you a major curveball and you end up needing those funds due to illness, etc). You can roll any unused funds over to another family, but frankly, I am setting this bucket up for my kids' education. I am currently targeting a balance of ~$100k for each when they are 18. However, $25k per year may not be enough to cover an education when they are ready. So, I am supplementing the 529s with CA muni bond ladders. Personally, I would rather be underfunded in the 529 and have the flexibility of the bond ladder if needed. Just my 2 cents.