Not convinced a traditional college plan is the right move? Try these out-of-the-box alternatives.
Open a Roth IRA
This retirement plan lets you contribute up to $5,000 in after-tax dollars annually, and the money grows tax-free. You can't touch the earnings till age 591/2, but you can withdraw the principal when that first tuition bill arrives.
Pay off your mortgage
If you can afford higher monthly payments, refinance to a 15-year mortgage. It'll let you own your home out-right by the time your child goes to college. Then write a monthly check for tuition instead of one to the bank.
Buy universallife insurance
This policy doubles as an investment: A portion of your premium goes to tax-deferred holdings. When it's time for college you can withdraw contributions, reduce coverage, or borrow against your plan.
Invest in a state municipal bond fund
These funds are averaging a 4 to 6 percent return, and as long as you pick one that buys bonds in the state of your residence, it's tax-free too. Plus, you can use the money as you please.
Originally published in the June 2010 issue of Parents magazine.