It only took Daron and Beth Van Helden a couple months after their oldest daughter was born to start saving for her college education.

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While one expert says they may have started a little late, Daron said starting a 529 plan for Kate, now 3 ½, was a no-brainer.

"We got some money when Kate was born, which kind of necessitated the need," said Van Helden. "We knew we should."

The Van Heldens have the one account for their two daughters -- Anna is 1 -- and whenever the children get gift money, it goes to that account.

"I suppose at some point we may look to some other (funding) sources, but we don't know what we'll need," he said. "We got out of the gate pretty strong, and having a second kid, there are some months we wish we weren't doing it. But the money comes out automatically. We don't see it; we don't miss it."

The Van Heldens took advantage of one of several options for starting a college savings plan for their daughters. Joe Hurley, an author and college financing expert from savingforcollege.com, said that one of the key advantages 529 plans offer is that anyone can use.

"There are no age or income limits, and very high contribution limits," he said. "Most have very low minimum contribution (limits) and they can help save taxes because they grow tax deferred and can be used tax free to pay for higher education expenses.

"People should really start to look at it as soon as they bring the baby home from the hospital. College ain't getting any cheaper."

Hurley is the author of "The Best Way to Save for College -- A Complete Guide to 529 Plans, 2007 edition". It is the seventh edition of the book.

"There have been substantial changes in the law over the last year, and a lot of changes to the programs themselves," he said. "New programs come, some leave or change administrators, change options, or maximum contribution levels. Those things change frequently. People might be relying on old laws that might not be relevant anymore."

One of the things that has changed over Hurley's years of writing the book is that almost every state offers a 529 plan. The Van Heldens live in Minnesota but have their money in Arizona's 529 plan.

"For us, getting the money going the most important thing," Van Helden said. "That plan was the least restrictive."

Hurley said most plans are open to nonresidents, and that it doesn't matter where your child will go to college since the investment is not going to the college.

"You can shop around for pretty much any 529," he said, recommending you first look into your own state's plan. "Some states offer tax deduction only if you contribute to that state's plan, which is available for residents only."

Any leftover money can be targeted for someone else in the family by changing the beneficiary or keep the account in the original beneficiary's name in case they go to graduate school at some point.

If the money is taken out and not used for college, the beneficiary owes income taxes and 10 percent penalty on the earnings, not the principal.

Pre-Pay Option

Washington is one of 15 states that offer a plan that allows pre-paying now for college in the future. It eliminates the worry about tuition increases later.

"The pricing is not necessarily tied to today's dollars," Hurley said. "When the prices are set, states do projections based on assumptions of what (tuition) increases will be and the investment returns of program assets. Most states are charging a bit more than current levels."

There is a risk when it comes to using a pre-pay plan, as opposed to a 529. Hurley said the assumption is made that your child will attend college.

"If the child doesn't go to college, or drops out, you can request a refund," Hurley said. "But you have to look at the terms of the program. You won't necessarily get the full value of tuition back."

Pre-pay plans target in-state schools, but most will allow attendance at schools anywhere.

"Sometimes you will get the same value (out of state) as if they went in-state," he said. "Other times you might get something less."

Other Options Available

Like an individual retirement account, Coverdell Education Savings Accounts have limits on the income you can have to contribute to the account and annual limits on how much you can contribute.

The CESA is the only education savings plan that can be used for K-12 education. And unless Congress extends that provision, it will expire in 2010. Contributions stop once a child reaches 18 years old, and the money has to be used by the time they are 30.

Custodial accounts -- Uniform Transfers to Minors Act (UTMA) or Uniform Gifts to Minors Act (UTGA) -- are a funding mechanism that Hurley does not recommend.

"They are my newest four-letter word," he said. "There's a whole lot of risk putting money into the child's name."

According to fairmark.com, custodial accounts are somewhat similar to trusts. Both place property under the control of a person who isn't the beneficial owner -- the person who has the ultimate right to enjoy the fruits of the property. In the case of a trust, a trustee manages the property for the benefit of the beneficiaries. In the case of a custodial account, the custodian manages the property for the benefit of the minor.

One of the issues Hurley brought up is, when it comes to applying for financial aid, the assets are in the child's name, not the parents'. Also, once the child reaches the age of majority -- either 18 or 21 depending on state law -- they can do what they want with the money in the account.

"They will have the control, and there's nothing you can do to stop them," Hurley said. "It does happen. In some cases, child knows about money before they hit 18 and it's waiting for them.

"Small amounts in an UTMA are fine. But when you start talking about larger amounts, you can find yourself wishing you hadn't done that."

How To Start Saving

Hurley said that the Van Helden's plan of automatic monthly withdrawals make sense.

"People have success if you treat it like a bill," he said. "People pretty much design their lifestyle with that as a given. They'll forget about what they're doing, but also build a nice fund over time."

Before you start directing money to come out of your account, it's best to find how much you should be saving.

"We have calculators available that give assumed numbers based on a child's age how much you need to set aside to cover some or all the bills," Hurley said. "Then it's a matter of doing some research on what vehicle or combination of vehicles will work best."

A pitfall that parents run into, Hurley said, is not understanding how the financial aid system works or what may be available to their child.

"They are overly reliant on aid that might not be there," he said. "Most aid is loans, not grants. Loans have to be repaid, as many ex-students will tell you."

Another misconception is that saving now may diminish the chance to obtain aid later.

"Aid is determined more by income than assets," Hurley said. "If you don't save, you may be short on assets to pay for college.

"It really is never too late to start. You simply have to do what you can and balance your college savings goals, like you would retirement."

• More Resources: 10News.com's College Planning Section
• 10 Things The Financial Aid Office Won't Tell You
• Student Loans Demystified
• The 529 Basics
• Fit Education Into Your Financial Future
• SmartMoney.com: Understanding The Kiddie Tax
• Bankrate.com: The Skinny On Levelized Tuition Plans