Monday, April 20, 2009

3 tips for College

Posted by Amina Isakovic

In an appeal to parents reeling from steep losses incurred in their 529 savings plans, several states are offering safer, government-insured investment options like savings accounts and CDs. But going the "safe" route may not be worth it for many college savers.

On Wednesday, Utah launched an FDIC-insured savings account in its Educational Savings Plan, becoming the sixth state to offer these more risk-averse investment options. (Each of the states allows nonresidents to contribute to their 529 plans. For more information on the individual plans, see our table below.)

At first glance, the investments sound enticing: With FDIC insurance of up to $250,000 per account this year (normally it’s $100,000), parents who put their kids’ college savings in a savings account or CD can rest assured that the money is protected from market meltdowns. And, with that investment as part of their 529 plan, they still get the benefit of tax-free growth if the money is used for college expenses.

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