Should I open a 529 or savings account for my niece?

My niece was born January 29th, 2011, so she's not even four months old right now. I saw how hard my parents worked to try to help me out with college tuition, but most of my schooling was paid for with loans that I'll be paying on for, seemingly, the rest of my life. My mom still tries to help here and there, sending them a check once in a while since I'm working a pretty low-paying job right now between my undergrad and grad school, but I'd like it if my niece could go to college without my brother struggling to pay for it, and without her having to take out as many loans as I did. I don't plan on having any children of my own, and I don't have any other nieces and nephews, so I'd like to start this for her right away. I've found old posts about 529 accounts being the best bet, but they were from '07 and I'm not sure if that would still be a good option now as we've been watching 401k plans lose money for years now. Would I be better off with a high-yield savings account instead? I'd prefer that this be something I can't easily withdraw from, because I don't want to be tempted to ever use this in the case of a financial emergency. I have other resources to use in case of financial hardship, so I just don't want to be able to even consider this money mine. Also, has anyone used Upromise.com to save money based on spending? It seems to work a lot like an airline miles or a cashback credit card. I just happened upon it from a search engine, and looked over their website, but I'd love to hear some real feedback on any success people have had from it, or hidden strings they ended up finding. Thank you!

In case it's relevant: we live in Wisconsin, I am a state employee and college graduate, niece's mom and dad are both employed, but receive state assistance as they did not have insurance through their workplaces. I have fair-good credit for a 25 yr old. It's taken some hits the past couple years as my student loans have come out of deferral and I bought a new car, but it's at least in the upper 600s still. I will be going back to school for an MBA and law degree next (2012) fall.

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  • Dan
    Lv 4
    9 years ago
    Favorite Answer

    Yes, a 529 college plan is a good idea to save for college. You put in after tax dollars, but the money grows tax free and is removed tax free as long as you use it to pay for colege. Its a great hassle free way to save for college.

    Source(s): Experience, I do it for my own kids
  • fcas80
    Lv 7
    9 years ago

    Yes, open a 529. Your niece has 18 years for the money to grow - that's a long time. Buy a stock mutual fund with low expenses. Just leave the money in for 18 years and don't worry about its day to day fluctuation.

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