Saving for Your Kid's College: Start Here, and Start Now

Picking which of these accounts to use (or whether you should use both) depends largely on the tax breaks your state will give you for having them. Ritter breaks it down: "If you are saving for college only and the 529 plan in your state gives you a tax benefit, you should start looking at your state's 529 plan. If it doesn't give you a deduction, see if you're eligible for an ESA. If you are eligible, consider the ESA, and put any savings over $2,000 per year in a 529 plan. In some places the benefit isn't that big or the plan has relatively high expenses... there might be other reasons not to choose it, but you should always consider your state's plan first."

Tactical Tips for College Savings

Alternatives: Savings Bonds, UGMAs and Roth IRAs

There are other ways to save for a college education that many people turn to every year, such as education savings bonds and Uniform Gifts to Minors Accounts (UGMA). The thing to remember about these is that they shouldn't be your first choice.

Traditionally, savings bonds and UGMAs have been popular because they were the only tax-advantaged options out there. Now specially designed accounts like 529 plans and ESAs are available, and they should be your pick for education savings.

College saving isn't purely the domain of parents, either. Savings bonds might have once been a great way for grandparents to chip in for the grandkids' education, but now it's important to remember that grandma and grandpa (and anyone) can set up a 529 plan with all the tax advantages that come with it.

One of the more attractive elements of the Roth IRA is the fact that you can pay for education expenses without paying any penalties. Even so, that doesn't mean that the Roth IRA is a good savings solution for school. Since contributions to a Roth IRA are limited, using portions for education expenses is a great way to take a huge chunk out of the Roth's income-generating advantages. Just set up a 529 or ESA instead.

Again, no single stock is a good long-term play to totally pay for college. Taking the time to set up an education account for your child is a great way to ensure that they've got all the options in the world when it comes time to look for a college or university. By following the concepts above when you set one up, you'll be on the path to maximizing the bang for your academic buck.

Finding the Right 529 College Plan