The 529 plan is not the only option for families preparing for college. You may want to consider looking into alternative investment options.
UGMA Custodial Account
This is a custodial account where the beneficiary (the child) owns the assets.
This type of account benefits the giver for tax and estate benefits. Furthermore, the custodian may sell assets for the child's benefit at any time.
Coverdell Education Savings Account
Money in these accounts grow tax-free, but contribution limits cap at $2,000 per year. You can use the funds for any qualified education expenses from elementary school through college.
Once the child reaches age 18, he or she has full control over the account. This means the child can do whatever he or she wants with the money.
Only couples with adjusted gross incomes of less than $220,000 can open this account. For individuals, the number is $110,000.
The account also must be liquidated by age 30.
High-Yield Savings Account
Although it is typically one of the "safest" choices, high-yield savings accounts are typically not appropriate for college preparation.
Today, most savings accounts do not accrue high enough levels of interest to offset inflation.
In fact, you may be actually losing out on money by stashing it away in the bank. If you have a very young child, your money will stretch much further if you choose to use the funds for investing purposes.
Whatever you decide, run some numbers through our college savings plan calculator to get an idea of what you can accomplish.