I want to invest money for my son's future use like college or buying
car or anyother use. I know there is 529 plan but I am not that much
excited to invest into that, the reason we're restricted to use for
educational purpose only. Also I read about the UGMA which is like a
savings plan and also there is no need of paying taxes for first
$1600, correct me if I am wrong.
Please help me which one is right place to keep this money also
details about the fees (fund maintenace fee, front/back load charges).
My son's age is three years old and I haven't start any educational
plan for him

---

Clarification of Question by monic_b-ga on 07 Nov 2005 08:42 PST

Hello 88tuner-ga 
Thank u much for detailed information, this really helps. I live in
Texas, I didn't find any 529 plans for Texas, Please let me know if
you know any also is that makes any difference if I open any other
state 529 plans

Thank you again.

529 plans are the most popular way to save for your child?s college. A
529 is a tax free investment plan. You put money in from very small
amounts per month (as little as $15 per pay period or $25 per month)
to as much as $55,000 all at once. That is flexible. When used for
your child?s college, the money is spent tax free. If your child
doesn?t need the money, it can be transferred to another family member
and still be spent tax free. If you end up never using the money for
college, you pay tax on your earnings plus a 10% penalty.
            
So, how do I buy them?  
529 plans must be sponsored by a state. All 50 states have plans that
are managed for them by stock brokers, insurance companies or mutual
fund companies. Most money going into 529s is getting there through
what are known as "intermediaries." That means commission sales
people, stock brokers, financial planners, insurance agents, etc. If
you put money in this way you will pay large commissions as high as
5.5% to have your money put aside for your child. That means each
dollar instantly becomes 94.5 cents. In addition, many plans have
gigantic management expenses that destroy your child?s savings. Those
expenses are as high as 1.5% or higher.
            
I recommend that you buy 529 plans direct without commissions and buy
low cost plans only. Below is my honor roll of plans. These are all
top plans that are all of equal value and promise. I've listed them in
alphabetical order to make it easier to find your state. If your state
is listed, buy its plan as you may get a state tax benefit as well. If
your state is not listed, don?t buy your state plan. Rather pick one
of these low cost ones. Most of the low cost plans are run by the
nation?s two lowest cost financial houses, Vanguard and TIAA-CREF.
Remember, with their plans you pay no commissions and management
expenses around .50% to .80%.

State Plan information Administered by: 
Utah* Utah Educational Savings Plan Trust Vanguard 


*****High Honors***** 
State Plan information Administered by: 
Alaska T. Rowe Price College Savings Plan T. Rowe Price 
California Golden State ScholarShare Trust TIAA-CREF 
Connecticut Connecticut Higher Education Trust TIAA-CREF 
Georgia Georgia Higher Education Savings Plan TIAA-CREF 
Iowa College Savings Iowa Vanguard (Upromise points) 
Michigan Michigan Education Savings Program  TIAA-CREF 
Minnesota Minnesota College Savings Plan TIAA-CREF 
Missouri Missouri Saving For Tuition TIAA-CREF 
Nevada Vanguard 529 Savings Plan Vanguard (Upromise points) 
New York New York's College Savings Program Vanguard (Upromise points) 
Oklahoma Oklahoma College Savings Program TIAA-CREF 
Vermont Vermont Higher Education Investment Plan  TIAA-CREF 
  
            
Which investment do I choose?  
Most 529 plans allow you to go into an age based portfolio. I like
that. The money for your child is adjusted into more conservative
choices as your child gets closer to age 18.
            
Or consider a Coverdell. The Coverdell account allows you to save
money for college or private school grades 1 through 12. The money is
spent tax free like a 529 account as long as it's used for education.
Coverdells limit your contribution to $2000 per year. Rather than
needing a state sponsor you set up your Coverdell wherever you wish: a
bank, broker, insurance company, credit union or mutual fund outfit.
My first choice again would be a low cost mutual fund company. The
huge advantage of the Coverdell is the use for private school. The
disadvantage is you have to choose and manage your own investment
choices.

"529 college savings plans?pros and cons »
529 plans typically sponsored by individual states offer owner control
of the account, high contribution limits, and tax advantages. Your
savings can be used for qualified higher education expenses at any
college or university.

Education savings accounts?pros and cons »
ESAs allow contributions of $2,000 a year per child and permit
earnings to grow federally tax-exempt. Your savings can be used for
education expenses at any level?elementary school through graduate
school. You must meet income limits to make the full contribution.

UGMA/UTMA accounts?pros and cons »
The Uniform Gifts to Minors Act and Uniform Transfers to Minors Act
provide simple ways to give tax-exempt gifts to children, who then own
the accounts at the age of majority (18 to 21, depending on the
state). You may use the accounts to benefit the child in any way,
excluding parental obligations like food and shelter.

Individual mutual funds?pros and cons »
Mutual funds offer a flexible way to save for college, have minimal
impact on financial aid, and keep the investments under the owner's
control. Invest as much as you want and be able to use the funds for
any purpose.

529 prepaid tuition plans?pros and cons »
Prepaid plans are sponsored by states, individual colleges, and groups
of colleges to allow you to lock in today's tuition rates for future
education costs. Earnings on prepaid tuition plans are exempt from
federal income tax if used to pay for qualified higher education
expenses.

U.S. savings bonds?pros and cons »
Series EE and Series I bonds offer special incentives to college
savers. The principal is guaranteed, and the interest earned may be
completely or partially excluded from federal income tax when used for
qualified higher education expenses."

http://flagship2.vanguard.com/VGApp/hnw/content/PlanEdu/College/PEdCollOptsWhatAreMyOptionsContent.jsp

I recommend doing your investment through Vanguard, they have a great
track record and seem to have the lowest fees available.  They also
provide very good information on their website to guide your
investment choices.

The link above is where the quote came from.. you can also access
other information and links to get your investment started from there
if you're interested.