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529 Plans

Question: My husband and I had our first child in February. Our budget has us paying off our student loans and credit card debt in the next 16 months. We'd like to put the money we currently spend on our student loans ($500 a month) and place it in a 529 fund for our daughter once both debts are paid off. I've seen a lot references to 529s, but was wondering if you could recommend some sources that provided guidance on how we can review the various states' 529 plans and their pros and cons. By the way, we plan on spending the money we've budgeted monthly on paying off the credit card debt to restore our savings as I stayed home on unpaid FMLA to care for our daughter after utilizing all my paid sick leave from work. We were able to finance the unpaid leave from our savings, which also depleted it (but was well worth it). Jennifer, Spring, TX

Answer: What a good use of savings. You had the money to do something important for your family. Bravo. The reason I'm posting this question is that your approach toward debt-and-savings is one I highly recommend: Pay down the debt, and when it's extinguished keep on setting aside the same amount of money into savings. It's a sound strategy for replenishing and building up savings.

The best resource for learning more about 529 college savings plans is at www.savingforcollege.com. It offers a good overview section for free. You will have to pay a modest price to get access to the detailed information. Check it out.

About the author

Chris Farrell is the economics editor of Marketplace Money.
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I started a company that lets anybody in your circle of friends and family gift directly into your child's 529 plan. So instead of another Barbie Doll or shirt from the Gap people can gift into your child's plan. It's a simple site and concept that helps people save for college and give meaningful gifts. The site is <a href="http://www.freshmanfund.com/" title="FreshmanFund">www.freshmanfund.com</a>

I also write a blog on saving for college the site is <a href="www.giftingforcollege.com" title="Gifting For College">www.giftingforcollege.com</a>

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