Make the most of 529 plans

Get a jump on saving

You don't have to wait for the stork to arrive to open a 529 account. If you want to set one up before you have children or grandchildren, you can designate yourself as the beneficiary and transfer the assets to the child later.

Invest on a regular basis

Use dollar cost averaging to build your college savings by putting aside a set amount at regular intervals. Many employers offer automatic payroll deductions for 529 plans. If yours doesn't, consider making an automated transfer from a checking or savings account.

Make it a family affair

Some 529 plans provide gift-certificate forms or contribution slips to help family members and friends make direct contributions to a child's plan for birthday or holiday gifts.

Diversify your investments

You want to have a mix of stocks, bonds, and cash that will shift as your child gets closer to high school graduation. Age-based plans will do that for you automatically. For 2009 only, the IRS will allow you to change your investments within a plan twice a year, up from only once a year. This might be a welcome development for those who were unable to reallocate last year when market losses wreaked havoc with their 529 balances. On the other hand, you might end up regretting moving money into CDs just as stocks turn around.

Learn more

One of the best Web sites on 529 plans is www.savingforcollege.com, which is owned by Bankrate.com and offers news and information on all state programs. You can also find general information and links to your state's program at www.collegesavings.org.

This article appeared in the May 2009 issue of Consumer Reports Money Adviser.