'GMA' Quick Tip: Funding Your College Education

Jan. 13, 2011 — -- Most parents wonder when they should start a college fund for their kids. According to "Good Morning America's" personal finance contributor Mellody Hobson it's never too early to start saving. Here she explains some of the college savings plan options available through the government.

529 plans or Qualified Tuition Programs are a great way for a family to save for their child's education, and I definitely recommend including them in your investment portfolio. A 529 plan allows you to put money in now for college expenses for your child and you can withdraw from it tax-free for qualified college expenses such as tuition, books, fees and even housing.

Before you decide you should know there are two types of 529 plans -- college savings plans and prepaid tuition plans. With a college savings plan you can use the funds at any school in the country and you can purchase other state's plans, so they offer you more flexibility. However, they also have more risk because you are investing in mutual funds with have a risk of going down. If you decide to go this route, different investment options are offered depending on the state, so choose the one that fits your risk appetite.