What Does Dave Ramsey Think About 529 Plans

When investing for college Dave Ramsey, the money man on talk radio and TV, says put the first $2,000 in a Education Savings Account (ESA, Coverdell Savings Account). ESAs are very simple and work much the way a personal IRA does. When saving for a young child who will attend a public school, the ESA will usually be all you need.

For investing more than this amount or if your income exceeds $200,000 annually, choose a 529 plan. The challenge with 529s is that every state has a different 529 plan and they all work differently. Some allow you to pick mutual funds, some require you to choose funds based on your child’s age, while others are pre-paid tuition programs.

When choosing a 529 plan, pick a plan that allows you to choose the funds up front and to keep those funds all the way up until time to use the funds for education. Remember to stick with the four types of funds Dave suggests. Don’t use the pre-paid plans or ones that do age-based asset allocation.

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