Free The Money Class by Suze Orman

makes absolutely no sense to sign up for an in-state plan that has high fees and expensive mutual funds. It can make more sense to pass up the tax breaks and choose a plan offered by another state that has lower fees and better investment choices.
    Focus on fees . Similar to how a 401(k) works, when you contribute to a 529 plan you will choose from a menu of investment options. Typically these are mutual funds. Every mutual fund has an embedded annual fee called the expense ratio. This can be as little as 0.20% or so, or it can be 1.5% or more. The more you pay in fees the less your money will go toward paying for college. Before you sign up for a 529 plan make sure it offers mutual funds with annual expense ratios below 1%, and the lower the better.
    Check for conservative investment choices . As I explain below, by the time your child is a senior in high school you will want to have the bulk of your account in conservative investments; it is too risky to have your money invested in stocks when you know you will need that money in one to five years. Not all 529 plans offer a money market or certificate of deposit (CD) option. Please stick with a plan that gives you the option of pulling out of stocks as your child nears college age.
    Understand beneficiary transfer rules . If you have more than one child and you anticipate you may want to transfer the beneficiary from one child to another, make sure your plan allows this move.
    HOW TO INVEST YOUR 529 PLAN
    Many parents with children in high school learned a very painful lesson during the 2008 financial crisis when their 529 accounts lost 30% or more because so much of their account was still invested in stocks. Given that they had just a year or two before they would need to start tapping their funds to pay the college bills, they should never have left so much in volatile stocks. And what was most alarming was that many of these parents had left it to the plan to make the decision about how much to have in stocks versus bonds and other conservative investments. A popular feature of many 529 plans is an age-based fund that leaves it to the plan sponsor to alter the mix of stocks and bonds based on the child’s age. This works just like a target retirement fund; the idea is that as the child gets closer to college, the portfolio will become more conservative. In fact that’s how many plans work, but not all. The bottom line is that you cannot blindly rely on anyone to make your investment choices for you. You are responsible for making sure your money is invested in a way that makes sense for you.
    If you investigate an age-based fund within a 529 and are comfortable with how it ratchets down your stock allocation as your child progresses through high school, then that is fine. But please make an informed choice. You can always build your own portfolio by choosing from among the other investment choices offered within the 529 plan.
    Here is my suggested allocation:
     
Under age 14: 80–100% stock mutual funds
Age 14: 75% stock funds
Age 15: 50% stock funds
Age 16: 25% stock funds
Age 17: 0% stock funds
    TIP: One absurd restriction imposed on 529 investors is that you are only allowed to change your asset allocation once a year. Please be aware of this rule and make sure you complete all your rebalancing at one time.
    If you do not choose the age-based all-in-one fund offered within the 529 (on this page I explain why I do not like these all-in-one funds), then the advice on investing your 529 echoes the advice in the retirement chapters: The bulk of your stock allocation—I recommend 85%—belongs in large U.S. blue-chip firms. If you see a fund with the words “S&P 500 index,” that is a good choice. Or any fund that is described as investing mostly in “large cap” stocks. The remainder of your stock allocation can be invested in an international stock fund or ETFs. We live in a global economy; while your U.S. blue chips typically derive plenty of their business