College can be massively expensive. Especially if you are a family with young children, you may be nervous about the eventual cost of your child’s secondary education; with tuition rates on the rise, the price tag of a college degree 15 years from now is hard to figure. The only thing that is for sure? That college will be expensive.

Named for a section of the U.S. tax code, so-called “529″ college savings programs give families a tax-advantage, while dispensing with some of the more restrictive federal rules of other savings accounts. In this article, BankShout will look at the features and benefits of 529 savings plans, as well as listing some of the surprising (mostly beneficial) rules involved.

Basically, a 529 plan is a savings account that can be accessed for college expenses, including not just tuition but also room and board, for instance. The 529 is administered through a state plan. You pay income taxes on the money you contribute to the 529, but no taxes on either earnings or withdrawals, so long as the funds are used for qualified, ie. college, expenses. 529s also often qualify for a gift tax exclusion–crucial to making large, single-year contributions of $13,000 or more in many states. Although 529 plans are administered by the state, you actually aren’t always limited to opening an account in your state of residence; you can open certain 529 plans through any state that you want, one of those surprising rules we mentioned.

So 529s offer a big tax advantage, which is always key for a savings account–especially one that is planned for such a major expense. Yet you will still want to choose between types of plans, so that you can have the 529 that best fits your family’s needs. Basically, 529s are either Prepaid or Investment types. In Pennsylvania, where I live, the prepaid option is tied to the rate of tuition inflation (as opposed to being tied to bond or equity markets, for example). In the Keystone State, the basic tuition level is based on the average cost at the state’s 14 community colleges. Yet if you think your child is bound for a more exclusive school, you could instead choose the average tuition of the Ivy League schools.

Prepaid 529s require a bit more planning than the investment type. When your kid is only 5 and just learning to read Green Eggs & Ham, do you really know whether she will be at Butler County Community College or Hah-vaahd in 13 years time? Yet tying 529 earnings to inflation is an exceedingly realistic thing to do, given the explosion in college expenses.

Alternatively, you can choose an investment 529. Managed by a plan administrator (in Pennsylvania’s case, that would be Vanguard), the investment type 529 allows the saver to choose a fund that is based on preferred risk, as well as on the age of your child. Unlike prepaid plans, there is no guarantee that your account will outpace the level of tuition inflation, and you may in fact lose money, since returns are based on funds that are tied to stock and bond markets.

If you are a regular BankShout reader, I likely don’t need to tell you about the time value of money. Getting started early is a huge interest-earning advantage when saving for any goal, let alone one the size and scope of a college fund. Starting a 529 savings now for your young child can save you thousands of dollars in the future. Think about your child’s age now, your basic family expectations regarding the type of school the child may eventually attend, and how much you want to put aside each month, based on your current income. You can visit this link to get a more detailed idea of how 529s work in Pennsylvania, then Google “529 plans” and add your own state to see what’s available. Doing some research now can pay off big time in the long run.