If you're going to invest for your children's college education-and you should-you need to make some decisions. Specifically, which types of investments should you use? Fortunately, you've got a lot of options.

UGMA / UTMA. You can set up a custodial account as established by either the Uniform Gift to Minors Act (UGMA) or the Uniform Transfers to Minors Act (UTMA). This type of account may offer you some tax advantages. In such accounts, the first $750 of investment income is tax-free to a child under 14; the next $750 is taxed at the child's rate, and any amount over $1,500 will be taxed at your rate. After children reach 14, all their investment income is taxed at their rate.

You'll have to weigh the potential tax benefits of an UGMA/UTMA account against another factor: loss of control. While your children are minors, you can still control the account, but once they reach age 18, the money is theirs to do with as they please.

Section 529 plans. In recent years, Section 529 plans have drawn a lot of attention. These plans are available in two different versions: a pre-paid tuition program and a tax-deferred savings plan. Of the two, the savings plan version, because of its greater flexibility, has become more popular.

And, thanks to recent tax law changes, the savings plan offers even greater benefits. Specially, all withdrawals used for qualified education costs will be totally tax-free, as long as the money is used for the college or graduate school expenses of the beneficiary you've named-your child or grandchild. When you establish a Section 529 plan, you don't relinquish control over your contributions until you're ready. You decide who will get the money, when they'll receive it, and how it can be used. You can even change beneficiaries.

Coverdell Savings Plan. Formerly known as the Education IRA, the Coverdell Savings Plan gives many investment options-stocks, bonds, certificates of deposit, etc. Effective in 2002, if you meet certain income limits, you can contribute $2,000 a year to the plan, up from just $500 in previous years.

Contributions to a Coverdell Savings Plan are not tax-deductible, but all earnings and withdrawals are tax-free, provided you use the money for qualified education expenses. As with the Section 529, any non-education withdrawals may be subject to a 10% penalty.

College is already expensive, and costs continue to rise rapidly. Even if your children don't go to college, they'll probably need some help along the way. By investing regularly, you can help your kids get off to a good start in the adult world-and that's worth supporting.

Rebecca Foster has been helping clients with retirement and estate planning needs for 14 years. A native Oklahoman, she and her husband and three children are active in church. She graduated from Louisiana State University with a Business degree and has a passion for helping people reach their goals, especially retirement goals.