This is a tough one.  Between paying for daycare, your own retirement account – how are you expected to save for college?

The government doesn’t make it easy.  There are two options: 529 plans and Coverdell plans.  Both allow you to place money into the respective account and the earnings grow tax free.  Contributions to these plan are not federally tax deductible (sorry). However, the payouts (including earnings) are tax free if the money is used to pay qualifying college bills.  Five states offer taxpayers a deduction for contributions to any state’s 529 plan: Arizona, Kansas, Missouri, Montana and Pennsylvania. Nine states currently have a state income tax, but do not offer a deduction for contributions: California, Delaware, Hawaii, Kentucky, Maine, Massachusetts, Minnesota, New Jersey, and North Carolina. Every other state is somewhere in-between.

One suggestion, if you have friends or family that like to purchase gifts for your child, and your child has plenty, suggest to them that they contribute a like amount to the college fund.  Another method of funding is opening an account at upromise.com.  It’s run by Sallie Mae, so safe.  If you shop through their site a percentage of the purchases is added to the college account.  If you register your cards, a percentage of certain restaurants and travel will be added.  5% is what u-promise is stating this month.