In addition to supporting children in their academic efforts, you can save and invest to help cover the cost. The sooner you start and the more regularly you add to a college fund, the more you can help — not only because you're steadily increasing your principal, but because that principal can grow through compounding. Most college savings plans also offer tax-free earnings when the money is used for qualified education expenses.
Your options
Ways to save for college
There are several tax-advantaged ways to save — and you may consider combining them, which also helps diversify your investments.
529 plans are among the most popular ways to invest for college. Sponsored by states and managed by financial institutions, they let you designate a beneficiary whose qualified education expenses the money will cover — including technical or trade school, college, or graduate school, plus up to $10,000 a year for K-12.
You contribute after-tax money, but the earnings are tax-exempt, so the account can compound faster. Withdrawals are tax-free for qualified expenses. Every state offers a plan, so you can choose the one that works best — though it's often worth checking your own state's plan first for resident benefits.