The College Savings Cheat Sheet (continued)

Coverdell Education Savings Accounts (CESA) used to be known as Education IRAs. Distributions used for qualified education expenses out of these accounts are free of federal income tax. The catch? Contributions are limited to $2,000 per child from all sources and there is a modified adjusted gross income phase-out for contributors that can limit the size of the contribution.

Read the Fine Print

Fees and expenses are a drag on account returns and need to be considered as part of the mix in deciding between types of accounts. 529 plans charge an annual management fee as a percentage of the assets value. So do mutual funds. And fees hugely affect your bottom line. For example, if a fund charges a front end sales load of 5.75 percent, then only 94 cents of your college savings dollar gets invested for future return!

So what about all that tiny print on the back of the brochure? Read it. Fees are sometimes bundled together but may be shown separately. Is there an annual maintenance fee? A fee to open an account? To compare plans, you need to compare fees.

Make It Automatic

You can't spend cash that never hits your wallet. An automatic investment plan (AIP) moves money into a college savings account on a regular schedule, without any further action on your part. AIP contributions keep college savings on track. And the fact that you don't have to approve them constantly makes it a little less painful.