11 percent of parents are not saving for their child’s college education because they’re overwhelmed by the choices for savings according to a recent survey. It’s kind of like figuring out retirement. There are so many different accounts and so many different ways to save. How do you know what is the best way for you?  So you just do nothing, or convince yourself that you can start to save later instead of starting to save. We’re going to go through some of the best ways to save for college so that you can get started saving for your child’s college education right away – no more confusion about where to start in this article. This is not the most ideal way to save because you’re not getting growth on your money, but it is getting you started. The only way I would start and stay with a savings account and not move to one of the next options would be in case your child is within four years of college.  Then you don’t want the money to be subject to the market swings, and a savings account or money market would be a good place to save.  

Where to save for college

The next way that you can save for your college savings is to use an ESA, which is an education savings account. This is very similar to an IRA in that it’s a tax protected account set up at a brokerage company that you can invest in for college. These are accounts that are sponsored by states. Your state might have its own 529 and the states bordering you will also have their own plans. A prepaid plan has you do exactly what it says – prepay college costs.  For example: you have an 8 year old and you set up a plan to prepay his college costs now. The return on your investment is the growth rate for college expenses. The drawback of this plan, however, is that it traps you into having to go to that particular college, or a college in that state. What happens when your child gets a full ride scholarship to a completely different college and you can’t transfer funds to another child or your child wants to go to another school? There’s too many what if’s with a pre-paid plan, so I recommend you avoid the prepaid college. The second type of 529 plan is also sponsored by the state but you’re investing funds in regular investments to go to any college. It doesn’t even have to be in the same state (check your state’s plan to confirm this). You don’t even have to invest in the 529 plan of your own current state actually. Most states open their plans up to anybody. So why would you choose a different state over your state?   Well, many states offer a tax deduction to use their plan, so there are many benefits to staying in your own state.