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So, how do you pick the right plan?� It partially depends on how sure you are that you are going to send your child to college...let me explain.� With the Education IRA and the State Savings Plan, you must spend this money on college.� With the Roth IRA and UGMA (or UTMA), you can spend the money on other things besides college.� You can spend money from either fund on things such as music lessons, a computer for school, summer camp, and of course college.� With Roth, you can spend the money on yourself or anything you want...as long as you only spend contributions, not earnings.

Finally, you can contribute to more than one plan at the same time!� You can choose the UGMA with the State Savings and Roth...all at the same time.� However, watch out for the Education IRA (see below).

How Do You Set Up These Plans?

You can set up the Education IRA, the Roth IRA and the UGMA trust fund with a brokerage agency, bank, etc.� All that happens is that you fill out some paperwork that designates that the money you will send to this fund will be kept in a separate account.� This means you will receive statements for each one of these that you choose to set up.�� In the case of the UGMA, you have to set up someone as the custodian of the funds, since this type of account is legally your child's.� You can choose to be the custodian...or you can appoint another relative to do it.�

With State Savings Plans, you must set up everything with the state that is offering them.� Again, you will have a limited choice of packages to choose from (sometimes just one).� Whether the money is invested in a stock-heavy package or a bond-heavy package is based upon how close your child is to going to college.��

Good question!� Here are the main drawbacks to each plan:

Education IRA:� You can only contribute $500 per year per child.� Also, your money MUST pay for college...or you get hit with a big penalty and tax.� Also, you can't use this and a state-savings plan during the same year. Further, you can't take full advantage of Lifetime Learning credits and Hope Scholarships (see next page) using this.

UGMA:� Once your child turns 21 (18 in some states), they have full rights to use this money for whatever they want.� If they are going to college with this money, this shouldn't be a problem because they will be finished with most of it by the time they turn 21.� Also, you need to be careful to not use funds in this for things that you as the parent would normally pay for yourself, such as food, rent, etc.� Further, using this type of plan might damage your child's chances of receiving financial aid (grants in particular).

State Savings Plan:� You are limited in choices as to where you can invest your money...and colleges tend to be more conservative.� Also, this money must be used for college, or you lose it.� However, you can transfer it to another sibling if they choose not to go.

Roth IRA:� You can only contribute $2,000 per year into this plan.� No earnings may be withdrawn from it until you are 59 1/2 (with a few exceptions).