Now that you have your little bundle of joy…it’s time to start saving for college. Yes, I just said it is time to start saving for college. It may be 18 years away, but the parents of today’s four-year-olds may face college bills of more than $200,000. No matter how many children you have, that is daunting.

To help make you feel a little more at ease, I wanted to give you some information this week about how you can start planning for college…and when.

With regards to when, the answer is: now. With statistics like the one mentioned above, you really cannot start too early. I recommend starting as soon as you feel up to it after giving birth. If you have older children and are getting a little nervous…don’t…just start as soon as you can.

I know it can seem a little overwhelming with all the different information out there about saving for college, but don’t get discouraged. There are many different ways you can save for your child’s education; I will outline two of the most popular ones below.

Education Savings Accounts (ESAs)

• Most popular type is a 529 plan
• Should be considered a long-term investment
• Can be established for any child under 18 years of age
• Any earnings grow tax-deferred
• Qualified distributions are federal income tax-free
• There is an annual contribution limit of $2,000
• Parents/guardians maintain control over the distribution of assets
• One caution is the assets in the ESA may influence your ability to qualify for financial aid or limit the availability of certain tax credits

Custodial (UGMA/UTMA) Accounts

• An adult manages the money, but the child owns it
• No gift tax involved when you transfer the asset
• There is no need to establish a trust for transfer the asset
• Child takes control between the ages of 18 and 21
• Not tax-deferred
• Investment earnings on a portion of the withdrawals are taxed at the child’s rate
• Money does not have to be used for education costs, but must be used for the benefit of the child

This is just a little information to get your wheels turning. If you really want to know more about the pluses and minuses to each of the different plans, I recommend you discuss it with your financial advisor.

I know parents all want what is best for your children. This is something you can do now that could impact your child’s life forever. Even if it is only $20 per month, every penny counts. Trust me, your child will thank you later.