I love sharing useful information. My adrenaline spikes every time a friend asks me about investing, a client needs to know the best approach for tackling her debt, or I receive questions from my readers. So thanks for trusting me with your personal finance issues.

Recently I received  a question about 529 plans. The reader has two children, one of which already has a plan that was set up through a financial advisor/broker at his bank. When the reader went back to set up the account for his second child, he was told that the bank no longer helped with the plans. So he approached me wanting to know what this sudden change meant and if the first plan was safe where it is.

I first want to start out with the basics of 529 plans. Later in the week, I will cover tips on how to get the most out of your college savings.

What is 529 plan?

A 529 plan is a vehicle that you can use to save on the cost of college.

The plans are operated by a state or an educational institution, and nearly every state has a version at this point.

Two Versions

529 plans come in two different varieties:

• Savings Plan: In this plan, you contribute money to an account and pick investment options, as you would in a 401k or IRA. Also like retirement accounts, the various 529 plans offer an array investment choices to fit your goals.
• Prepaid Plan:  This type of plan allows you to prepay all or part of the costs of an in-state public college or private institution. These plans cover either a predetermined amount of tuition expenses (known as a contract plan) or certain percentage of units or credits you can use in the future (a unit plan).

As the reader found out, you can enroll in a 529 either through (1) the plan manager, or (2) a financial advisor or broker. Keep in mind, if you choose to register through an advisor or broker, you will likely have to pay a sales charge and will have higher annual costs. (He or she has to get paid somehow right?)

How to Choose

People become overwhelmed when choosing a 529 because of the many options. The best plan really depends on your personal circumstances, but here are three general guidelines to start you out:

• Savings Plans Offer a Little More Flexibility: Most savings plans allow participation from residents of any state. If you choose your state’s plan, you will likely get an income tax deduction for your contribution (assuming you live in a state with income tax). However, most prepaid tuition plans are only offered to state residents. In addition, the savings plans give more flexibility in what counts as a qualified education expenses. You can use money in the savings account on tuition, books, equipment, fees, room and board, and other costs. Prepaid tuition plans, on the other hand, usually only cover tuition.
• ·Find Low Cost Plans: If you go the savings plan route, remember that costs matter! So look for plans that provide low-cost fund options that allow you to keep as much money as possible into the account and still meet your investment objectives.
• Help is at your fingertips: www.savingforcollege.com provides a wealth of comparisons and analysis of the different types of plan. The site can also guide you to which plan best meets your needs. If you need additional guidance, I suggest finding a fee-only financial planner who can give you object advice, rather than someone that gets a commission for selling you a plan.

Saving for college has become more important than ever, especially with the high increase in tuition. Tune in on Friday to make sure you’re getting the most out of your 529.