Six Month Checkup for Baby and College Fund

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Six Month Checkup for Baby and College Fund

Written by John Bonynge

Photo:dsb nola, Creative Commons, Flickr
I can't believe that it has been six months since my son was born, and that can only mean two things: shots for the baby and a checkup on the college fund. Let's just say that the baby is doing better than the college fund.

Aaron Bonynge, age 6 months

With the recent market downturn, my son has grown larger and the money in the college savings account has actually shrunk. But let's step back for a minute and put this all in perspective.

Six months ago I opened a 529 College Savings Plan with Fidelity. I initially deposited $1,000 and set it up to have $250 a month automatically withdrawn from my savings account. I chose Fidelity.com because their 529 Plans have low management fees. I chose the California sponsored target index fund with an end date of 2024. This means that the fund automatically adjusts itself to be less aggressive as 2024 approaches. This fund has a 0.50% management fee but no other fee associated with the account. I am taking advantage of dollar cost averaging by investing a set amount each month. So a dip in the market, and especially one so early on in my time horizon is no big deal. In fact it is a good thing and I'm actually picking up more shares at a discount this way.

I could have chosen to invest in the Social Choice Portfolio, but at a 0.80% management fee, I'd rather buy carbon offsets on Carbonfund.org or have the freedom to chose my own charity (I like Samaritan's Purse personally). If you don't like the index fund or social choice approach, there are plenty of other choices as well.

With $50 minimum initial investment or $15 minimum initial investment, if you set up automatic monthly investing, anyone can start saving for their child's college education. There is plenty of great information about 529 College Savings plans on sites like collegesavings.org or savingforcollege.com. Wikipedia does a great job of explaining just what a 529 plan is and how it differs from other investment vehicles. Municipal Securities Rulemaking Board gets into the legal nitty-gritty of 529 plans here.