"I think the lesson to take away from this is, if you're in a 529 plan and your children are in high school, it's time to start moving your money into more stable value type of investments," says University of Wisconsin financial specialist Michael Collins.
Collins refers to 529 plans; the state-sponsored college saving plans that have become very popular over the past several years. He says a key to getting the most out of the plans is to make sure the money is invested in the right place at the right time.
"As you can start to forecast towards the future, even if you think returns are good, start to get it into more stable investments like bonds. It's very much like a retirement fund. You have to make sure that as that day comes to make those college payments, you have your money in a liquid form, so you're not so effected by a downturn in the stock market."
Nearly every 529 plan in the nation, 93%, fell in value over the past year, and about a third lost at least 40%. Wisconsin's 529 plan, Edvest, is one of the nation's better-performing funds, ranking 13th in the past year and 9th over the past five years.
There are some 529 plans that are all set up for you. They're known as target date funds.
"You tell them the date you expect to graduate from college, they set it up so that, as the kid is 3-4 years old, it's invested in much riskier, but higher returning assets. As they get to high school, it's a mix, some riskier, some more stable with some low return stable assets. And as they get into college, it's more stable value assets."
But even some target-date funds missed the mark because they were too loaded with riskier investments. So, be sure to do your research to find out how a fund invests your money over time.