Color of Money

And what about new contributions?

Keep the money in cash, said CFP David Holland of Holland Advisory Services in Florida. “That’s prudent given the proximity to use,” he said.

I suggested to the couple that their son apply to an in-state school, in which case — even with the market downturn — they should have enough saved already.

If you’ve got plenty of time before your child goes to college and you’re putting money in a 529 plan, keep funding it, says Jennifer Kruger, branch manager of the Bryant Park Investor Center at

Fidelity Investments.

“When there’s volatility in the market you have time on your side, you’re basically buying things on sale,” Kruger said. “Weeks ago, things were expensive. Now they’re cheaper.”

Now’s a good time to invest in a 529 plan and increase your contributions using an investment strategy called “dollar cost averaging,” Kruger advised. Under this method, you regularly invest no matter what the market is doing. The effect is that you buy more of an investment when prices are low and less when costs are high.

Also keep in mind that if you stop investing in a 529 plan, you could lose a valuable state tax deduction, said Corbin Blackwell, a New York-based CFP at Betterment.

“Many states provide tax breaks for residents who contribute to that state’s 529 plan,” she noted.

The volatility in the stock market is a reminder that parents need to pay attention to the allocation of their 529 plans, said Carolyn McClanahan, a CFP with Life Planning Partners in Jacksonville, Fla.

“This is one reason we use ‘aged based’ portfolios for 529 plans, so the risk is dialed back automatically,” McClanahan said.

I know you’re frightened by the rocky markets. I am too. But don’t let fear drive your decision-making.