The problem that most parents face is the prospect of paying for a child’s education; lets be realistic, most parents are not that fortunate to have been born into wealth.

We encourage our children to seek aeducation all of their lives, and rightly so, but while we are encouraging them, we also need to be planning for a way to pay for that higher education. Just saving a few dollars away on regularly probably won’t cover the cost. The cost of college education is rising year on year at an even greater rate than inflation.

The problems caused by sub-prime lending issues and the “credit crunch” should now be focusing our minds even more. We should all actively aspire to get out of the ghettos we may find our selves in whether in our minds, or real.

One of the better ways to fund it 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 that provides families an opportunity to save money for college. These plans are known as qualified tuition programs (QTPs), but they are commonly 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. Congress authorized QTPs 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 got to.)

* Prepaid Tuition Plans:  Prepaid tuition plans allow parents to lock in future tuition at public state colleges at current rates. (The benefit 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 every option. It’s to everyones’ benefit to make a choice and start the plan early in a child’s life.

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