Many Americans aren't prepared as they should be when it comes to saving for college. A 529 plan allows you to save for education expenses using after-tax dollars (exempt from federal taxes). The money grows tax-free and can be used to pay for qualified education expenses, such as tuition, room and board, fees and books.

We recommend direct-sold plans, those that are sold directly by your state, which translates into lower fees for you. The biggest advantage to a 529 plan is the tax implications. When you take out the money for qualified expenses, you aren't taxed. If you take money out of traditional investments, you'll be taxed on any money you earned.

Because of their superior tax benefits and relative flexibility, we feel a 529 plan is the best way to save for college. 

Prior to investing in a 529 Plan investors should consider whether the investor's or designated beneficiary's home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state's qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.