Getting Educated About 529 Savings Plans

Most of us look back on our college careers and fondly smile at those four years of unbridled happiness. Those were good times.

Now, as a mother of three, it makes me nauseated to think that my son may someday be in a fraternity and that my daughters will, well, someday be in a fraternity.

Unfortunately, there's this pesky societal requirement that a kid needs at least a bachelor's degree to get a decent job these days. So I have no choice but to unleash my children to this debauchery and hope that they learn something in the process.

To make matters worse, I must now start saving for what will probably be the most expensive party of their lives. With private tuition already at $30,000 a year, presuming a 6% annual increase, I'm looking at a $300,000 party by the time my 18-month old youngest sweetie is driving on to campus. (Again, I'm nauseated.)

So I've decided to open 529 plans.

There are two types of 529 plans out there: the prepaid college tuition plan or the college savings plan. The first, as its name suggests, lets you prepay tuition at your state's colleges. The latter is just like a 401(k) account, and the money can be used at any school in the country. So the college savings plans are the more logical option.

These plans are mostly run by the big mutual fund houses such as Fidelity, Vanguard, T. Rowe Price (TROW Quote) and TIAA-CREF. While each state has its own plan, they're generally open to anyone, so don't let the so-called administering state confuse you. If you live in New Jersey and want to get into Ohio's plan, which is run by Vanguard, you're allowed. It's really just the name on the brochure.