[Explore frequently overlooked ways to pay for college.]
Earnings in Uniform Gifts to Minors Act or Uniform Transfers to Minors Act accounts are untaxed to a certain point, while 529 plans offer the additional tax benefit of a deduction or credit for the amount of contributions. A parent might want to put some money into a 529 plan, as well, in order to save on state income taxes, says Francis.
"In most scenarios parents would be smart to select the 529 plan given the tax benefits," Kazmierczak says. "But if it's not going to be fully used for educational purposes, go with a UGMA/UTMA registered account."
Trying to fund your education? Get tips and more in the U.S. News Paying for College center.