On my last money Monday I mentioned a good way to save for college that I stumbled across while learning to invest. It is called a Coverdell plan. This year you can max it out at $2000. After this year, unless the government keeps it at two thousand, it will drop back to $500 a year.
What I like about this account is that you choose how it is invested. It isn’t just another mutual fund or money market account. As long as you use the money made for college the earnings are tax free!
I only set up one of these accounts because if my oldest doesn’t use it I can transfer it on the next child without penalties.
Again, I found myself wondering what to pick to invest the money in. Since I am a little unsure of myself still, I decided to only invest half of it on the stock I chose. That way if I was wrong I would not lose too much money! To decide which stock I looked through my watch list and started checking the numbers again. (Rule #1 Investing). Because I am unsure I went with what I thought would be a somewhat safe bet. As in, put it in Warren Buffett’s brk.b. I figure even if I am still uneasy with this whole process Warren Buffett knows what he is doing. (and the numbers were good). So, in this case it was Phil Town’s advice on good management that helped me make the decision.