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The 529 plan was started in 1998; the name came from section 529 of the Internal Revenue Service, which created these savings plans. With the 529 plan parents can choose two options. The first is a savings program which allows students to use the full value of the account to any accredited college or university in the country, and some foreign institutions accept the plan.

The second option is the prepaid option. The plan covers in state tuition and will allow the student to transfer the value of the plan to private and out of state schools.

There are incentives to making larger upfront deposits on the plan. If you make a contribution between $12,000 and $60,000 for your beneficiary, you can treat the contribution as made over a five year period and for gift tax purposes.

Some parents may have a few questions about the 529 plan. Here are some facts.
* Parents do not have to pay taxes on the accounts earnings.
* Students do not have access to the account, the parent/grandparent does, and this assures the money will be used for school.
* If the student does not want to attend college, then the plan can be rolled over to another student.
* If the student receives a scholarship, the unused money can be withdrawn without any penalty, besides the tax.
* Anyone can contribute to the 529 plan
* There is no age limit for when the money can be used
* There are no income requirements that may make a student ineligible for a plan
Parents can contribute as little as $25.00-$50.00 per month to this plan. This adds up if parents begin saving when their children are first born. In hard economic times, being able to contribute such a small amount over a long period of time really adds up.

Another popular way for saving for a child’s college education is a Certificate of Deposit, or CD. What many parents don’t know is that CDs are part of a program that can be used specifically for college education. These are called CollegeSure CDs. These CDs are different from regular CDs; the main difference is the interest rate. The interest rate is guaranteed to be at least equal to the average increase of the cost of attending college. The idea is to purchase these CDs for the amount college would cost you in the present, and then the CDs earn interest that result in enabling you to pay for college by the time they mature.

Knowing how much your child’s college education is going to cost is the tricky part. The best thing to do is figure out which school your child will attend, then decide what size CD you will need to purchase. The main thing to remember is that it is never too early to start saving for your child’s education.

No matter how you do it, whether it is a savings account or CD, any amount you save will help in the future.

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