Quite simply, you’re probably a dumbass if you don’t do it.

And you’re probably a double dumbass if you don’t do it early.

There are two types of 529 plans, and the first type is like a Roth IRA for your kid’s education:

• You use after-tax dollars to fund it; therefore the gains inside the plan grow tax-free.
• It makes sense to start a 529 as early as you can, so you have the most amount of time to grow those tax-free dollars.
• Anyone can contribute to your kid’s 529; are you listening Aunts and Uncles and Grandparents?
• If the designated child doesn’t go to college you can use the funds for someone else’s education or even your own education.
• You, as the owner of the account, always retain control of the funds in the account.

If you want to know more about these tax-deferred plans, see this story from Kiplinger.

The other type of (less popular) 529 plan involves pre-paying tuition at a state or private college at today’s prices; and that makes a lot of sense given the rise in tuition over the past twenty years: 

But nailing down a pre-paid tuition plan is also going to take a lot of work.

Fortunately, the folks at SavingForCollege.com have done a lot of the heavy lifting for us:

• You can get more details on pre-paid tuition at private colleges here.
• To find out more about pre-paid tuition for state colleges, go here.

Yes, it is going to take a little work to figure out which is the best 529 for you and your family.

Here are the kinds of things you need to think about:

• How many kids you have
• Tax and financial aid implications
• Picking the right 529 for performance
• Costs, commissions and fees of 529 plan options
• Investment options inside the plan
• Minimum contributions

If you want to know more, see this story from Saving for College.

The rules for 529 plans (and tax benefits) vary by state, but you you can use a 529 plan from any state if it’s a better fit for you.

This is some crazy shit, compliments of Saving for College (we broke it out into bullet points to make this insane set of laws somewhat comprehensible):

• …more than two-thirds of the states provide state residents with a state income tax deduction or tax credit based on contributions to the state’s 529 plan, depending on the state.
• Seven states provide the state income tax break for contributions to any state’s 529 plan (Arizona, Arkansas, Kansas, Minnesota, Missouri, Montana and Pennsylvania).
• Not every state offers a state income tax break on contributions to the state’s 529 plan.
• Nine states don’t have a state income tax (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming)…
• …and seven states have a state income tax but don’t offer a state income tax deduction or tax credit (California, Delaware, Hawaii, Kentucky, Maine, New Jersey and North Carolina).

You got that?

Let’s not forget that money in a 529 plan can be used for qualified expenses other than tuition; for instance, computers, software, books and even dorm rooms and some off-campus housing.

And believe it or not, the IRS offers some very short, clear guidance on this here.

But rules and laws change all the time, so also heed this warning at the top of the IRS page and do your own due diligence to make sure you always have the most current info:

For instance, you can get the longer, most-up-to-date and harder-to-read details from the IRS here.

Forbes recommends:

• Bright Start Direct-Sold College Savings Program (Illinois)
• New York’s 529 College Savings Program – Direct Plan
• Ohio’s 529 Plan, CollegeAdvantage – Direct Plan
• U.Fund College Investing Plan (Massachusetts)
• UNIQUE College Investing Plan (New Hampshire)

Morningstar recommends:

GOLD TIER:

• Bright Start Direct-Sold College Savings Program
• Michigan Education Savings Program
• my529 (Utah)

SILVER TIER:

• CollegeAdvantage 529 Savings Plan (Ohio)
• Minnesota College Savings Plan
• MOST Missouri’s 529 Education Plan
• New York’s 529 Program (Direct)
• Oregon College Savings Plan
• Path2College 529 Plan (Georgia)
• Pennsylvania 529 Investment Plan
• ScholarShare College Savings Plan (California)
• Sen Edward J. Kasemeyer Plan (Maryland)
• T. Rowe Price College Savings Plan (Alaska)
• The Vanguard 529 College Savings Plan (Nevada)

SavingForCollege.com recommends:

• Bright Start Direct-Sold College Savings Program
• Invest529
• Maryland 529 — Maryland Senator Edward J. Kasemeyer College Investment Plan
• New York’s 529 College Savings Program — Direct Plan
• Ohio’s 529 Plan, CollegeAdvantage