Plan for this big expense

If you are a parent, saving for college can be one of your biggest expenses. Many parents don't start saving soon enough, not to mention that they just don't save enough, period. There are so many other expenses that need your hard-earned money that it's understandable why saving for college often gets pushed onto the back burner. There is your mortgage, your retirement account, and your child is still young.

Don't be lulled by time

When your child is young, it can give a false sense of complacency. After all, parents can feel like they have all these years to begin saving, but unfortunately, time escapes them. All of a sudden their son or daughter is in middle school and not a young toddler any more.

Look at your budget and decide how much you can stash away

Before this happens to you, take a look at your budget and see what you can stash away for college expenses. College is only going to become higher as time goes on -- 4-6% more per year -- so start calculating how much you will need for your child.

Look into you options

Once you have figured out how much you can set aside for college savings, look into 529 savings plans and Coverdell ESA's (Education Savings Accounts), which offer great tax breaks when using the funds for approved education expenses.

529 savings plans

For a 529 savings plan, there are no income limits; anyone can contribute to an account no matter their income. When funds are withdrawn, the growth on the account is not taxed if used for qualified college education expenses. However, there are "maintenance" costs associated with the account, usually 1-1.5%, but they can be as high as 2% for some of the higher plans.

Coverdell ESA's

Coverdell ESA's funds are not taxable upon withdrawal if used for education costs. These funds can even cover expenses for K-12 and graduate school, but they need to be used by the beneficiary by age 30. If not, then the amount left can be transferred to another Coverdell ESA for any family member who is under 30 years old. Be aware, though, that there is a cap to contributions if your income exceeds the allowable amount.

U.S. Savings Bonds

Other options are U.S. Savings Bonds, which are not taxed when used for college tuition if your income is below a certain amount, but their returns are lower the savings plans mentioned above.

It's not too late to start

It's never too late to start saving for college and definitely never too early. So what are you waiting for? One Budget's tools and Goals feature can help you.