College is a huge investment. In most cases, it is the second or third largest investment people ever make (after retirement). There are two main ways to invest for your children's college.
Formerly, the best way to save for college was through Educational IRAs (now called Educational Savings Account (ESA) or Coverdell Education Savings Account). It can be used for many educational investments, including elementary and secondary school. The child can withdraw the money tax-free if he incurs a qualified higher education expense (QHEE). Anything from books and supplies to room and board can be considered as a QHEE. However, it has a few disadvantages. Firstly, if the money is not spent, you cannot get it back. The money must go to your child. Secondly, the money must be withdrawn by age 30. Otherwise, earnings from the ESA will be taxed plus a 10% penalty tax. Also, persons making over $110,000 income are not allowed to contribute to the ESA.