Start Your Children's College Fund Early …

Ah! The problem that all parents face is the prospect of paying for a child's education. We encourage our children to seek a higher education all of their lives, but while we are encouraging them, we also need to be planning for a way to pay for that higher education. Simply putting a few dollars away on a regular basis probably won't cover the cost. The cost of college is rising every single year at an even greater rate than inflation.

One of the better ways to fund a child's college education is through the use of what has come to be known as "529 plans." A 529 plan is an investment plan operated by individual states rather than the federal government that provide families with a federal tax-free way to save money for college. These plans are known as qualified tuition programs (QTPs), but they are usually referred to as "529 plans," "state 529 plans," or "section 529 plans" because that is the number of the section of the IRS code that provides the plans' tax breaks. QTPs were authorized by Congress in 1996.

There are two kinds of 529 plans available ? college savings plans, and prepaid tuition plans:

* College Savings Plans: College savings plans allow parents to use the plan funds for college expenses at any college. (The benefit is that the child can choose the college he or she wishes to attend.)

* Prepaid Tuition Plans: Prepaid tuition plans allow parents to lock in future tuition at public state colleges at current rates. (The advantage is a greatly reduced total cost.)

Every state in the union has at least one of these options, and most states make both options available.

There are advantages to both kinds of 529 plans. Parents need to investigate and understand each option. It's to everybody's advantage to make a choice and start the plan as early as possible in a child's life.

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