Here’s the story: you’ve got kids. They might go to college, or to some other post-secondary education. It’s going to be expensive, and you’re paying the bill!

The average cost of attending an in-state public university for 4 years is $108,584, per the Education Data Initiative. For a private, non-profit 4-year university, that average cost for those 4 years jumps to $234,512. Regardless of your feelings about the value of a college education, that is a ton of money.

If you are in the 2% of folks who can afford to write that check every year, good for you! You are investing in your child’s future without bringing financial hardship to yourself or your child. For the other 98%, the best thing you can do is to start preparing early for your child’s post-secondary education. Here are a few of the best and most common ways that you can save:

529 Savings Plans are state-based plans that help families save for future educational expenses. 529s offer good flexibility in that they can be used for K-12 tuition in addition to a variety of post-secondary educational expenses. Once you put money into these plans, the money can be invested and grows tax-free. Withdrawals for qualified educational expenses are also tax-free, so you get some very nice “bang for the buck” out of these plans.

Some states offer additional benefits, such as tax deductions or credits for funds that are contributed to the account. Not all 529s are created equal; states offer different investment options and different contribution limits in addition to potential state tax benefits. Also, some states offer 529 Prepaid Tuition plans, which allow you to lock in current tuition prices at participating colleges and universities.

A second option: Roth IRAs. You probably know Roths as nice, tax-advantaged accounts for saving up for retirement. Because of the way Roth IRAs are structured, these can also be a great way to save for college and beyond.

While I don’t generally recommend taking money out of your Roth account before retirement, educational expenses are sometimes a reasonable exception, especially if you are specifically putting funds for future education expenses into your Roth. You are allowed to withdraw your original contributions penalty and tax-free. As well, qualified educational expenses can be paid out of account earnings penalty-free once the Roth has been open for 5 years. There is a potential downside, which is that funds taken out of the Roth account in one year can be considered income when a future years’ financial aid eligibility is determined.

Coverdell Educational Savings Accounts (ESA) are a third option. These have some similarities to 529 accounts, in terms of the tax benefits, and in fact there is a bit more flexibility in what you can spend your Coverdell funds on compared to the 529. However, you are limited to a $2,000 annual contribution to these ESA accounts, so it is very unlikely that a family can pay for college while only saving in this type of account.

While this is by no means an exhaustive list of options for saving for post-secondary education, these are three that are commonly used. You should know that each type of savings account has rules and regulations that guide both the donations into the account and the use of funds from the account, and I have only scratched the surface here.

One nice part of all of this is that you aren’t required to choose only one savings mechanism. You could use two or all three of the accounts mentioned above. You can also pair any of these with financial aid, grants, work-study, loans and a host of other options to help pay your student’s education bill. Even once you open a particular type of account, there is nothing to prevent you from using a different or additional strategy later.

Furthermore, you can use compound interest in your favor. If you invest $200 each month from the time your child is born until he or she turns 18, you could have over $90,000 in an account, based on an 8% annual rate of return. That would definitely take some of the sting out of your college sticker shock.

However you choose to save for your family’s education expenses, invest smartly and invest well!

Larry Sidney is a Zephyr Cove-based Investment Advisor Representative. Information is found at https://palisadeinvestments.com/ or by calling 775-299-4600 x702. This is not a solicitation to buy or sell securities. Clients may hold positions mentioned in this article. Past Performance does not guarantee future results. Consult your financial advisor before purchasing any security.