Do your homework: 529 college saving plans aren't guaranteed

Q: How can I check how safe my child's 529 account is?

A: Now parents aren't just nervous to see their kids' report cards. Getting the 529 college savings statement is even scarier.

With the Standard & Poor's 500 index down 38.5% in 2008, you can only imagine how poorly many 529 plans have fared. And big losses are the last thing parents need, as they desperately try to save for skyrocketing college costs.

Perhaps the biggest horror story in the 529 world so far has been experienced by investors in plans offered by Oregon, Texas, Maine and New Mexico. These plans offered an Oppenheimer Core Bond fund investment that lost 36% of its value in 2008, according to this story by USA TODAY's Sandy Block.

That was a stunning loss because bond funds aren't supposed to be that volatile. The average intermediate-term bond fund last year lost just 5%, the story says. Bonds should be less risky than stocks and help preserve capital as enrollment nears.

Having a bond fund do so poorly is brutal, since many parents will often shift most of their savings into a bond fund as their children approach enrollment.

Although investors might not have been able to see this coming, the loss in the Oppenheimer fund is another reminder to parents of just how important it is to do the due diligence in your 529 plan. Don't just automatically sign up for your state's plan and assume you'll have enough money when it comes time to write the tuition checks. You want to be absolutely sure you know what individual mutual funds your 529 plan is investing in.

In case you don't know this, you're not required to invest your money in your own state's 529 plan. Even if you live in California, for example, you can take advantage of low-cost Vanguard funds offered by Utah's plan.

And don't assume that once you choose your plan, you're done. Plans change, as some get better while others get worse. Be sure to read all the materials sent to you by the 529 provider. And don't miss, which is a great resource that can help you compare 529 plans and find the one that's best for you.

Matt Krantz is a financial markets reporter at USA TODAY and author of Investing Online for Dummies. He answers a different reader question every weekday in his Ask Matt column at To submit a question, e-mail Matt at Click here to see previous Ask Matt columns.