So you’ve just made an addition to your family? Congratulations! Have you started that college savings fund yet? Increasingly, economists say, workplace success demands a lot of education beyond high school, and not just for doctors, lawyers or engineers. Even skilled trade jobs can require four years of technical education, or more.

That costs money. The College Board estimates the average cost of a state university at just under $20,000 a year for in-state students, and maybe twice that for a private college. And the cost is rising faster than inflation: up 80 percent in the last decade, according to Education Sector, a Washington, D.C., education-policy research organization. So whether your child goes to college tomorrow or in 18 years, it will be even more expensive, even with financial aid.

Many students and families bridge the gap between what they have and what they need with student loans. While that’s often necessary, who wants to see the next generation take on huge debt? That’s why it’s important to start saving for college as soon as possible.

INVESTING IN ADVANCE

There are several alternatives. You can open an ordinary investment account and save the money there, but you’ll pay taxes on your capital gains. Alternatively, there are specific accounts you can use to save for college that offer a tax break.

If you have an Individual Retirement Account or a Roth IRA, you can use some of that money for college expenses without a penalty for taking it out early. Contributions to a conventional IRA are taxed only when you make withdrawals. Money contributed to a Roth IRA is taxed on the front end and then grows tax-free.

Another approach is a Section 529 college savings plan. These are named for the federal tax code provision that governs them. As with Roth IRAs, you invest after-tax money in 529 plans. But once invested, its earnings won’t be taxed by the federal government and most states (check your state’s laws to be sure).

When it comes time to withdraw money, you won’t pay taxes on it if it’s used to pay for college expenses: tuition, books and certain fees. If you withdraw the money to pay for expenses beyond the approved list, you’ll pay federal, state and local taxes and a 10 percent penalty.

TWO KINDS OF PLANS

There are two basic kinds of 529 plans: a straight savings plan and a prepaid tuition plan (available in some states but not others). In the prepaid plan, you save money and essentially lock in tuition costs at today’s rates instead of having to pay much more when your child enrolls.

With a regular 529 savings plan, you simply save money, although with a tax advantage. When you cash out, you can pretty much apply the money to the college of your choice.

Prepaid tuition plans can be a good deal, but they come with restrictions. For one thing, an individual plan is usually tied to a limited number of colleges, such as the state university system or institutions in the state where the plan is set up. Also, prepaid plans typically cover only tuition and certain fees. Room and board is not covered, or it costs extra.

A regular 529 savings plan lets you apply the funds to a wider range of approved expenses, such as room and board, books and other educational materials.

A prepaid plan typically requires a lump sum and installment payments. A regular 529 savings plan doesn’t, although of course what you get out depends on what you put in. You can find out more about the differences between these two plans at the Securities and Exchange Commission Web page at www.sec.gov/investor/pubs/intro529.htm.

Another bonus is that a 529 plan generally isn’t tied to just one child. Suppose you start a plan when your daughter is a baby, but by the time she gets to college she gets a free ride for her stellar academic record. You should be able to switch the benefit to a sibling.

QUESTIONS TO ASK

The SEC recommends asking a number of questions as you pick a 529 plan:

• Is it directly available from the state or its sponsor?

• What fees does it charge? Can you get the fees waived or reduced? How much of what you pay goes to the broker?

• How much can you withdraw from the plan, and when? What will the plan pay for?

• How and when can you change the plan, its ownership or its beneficiary?

• What are the plan’s investment options? How long are contributions held before they are invested?

• Which is better in terms of restrictions, tax advantages, fees and other features – the plan tied to your state? Or some other plan?

• What individual or firm manages the plan? When does that manager’s contract expire?

• What is the plan’s track record for performance?

529 LIMITATIONS

These plans aren’t a cure-all. For one thing, a recent study by Education Sector found that how fast a 529 savings plan grows will depend mightily on when you start it, because the rises and falls of the stock market can make growth erratic.

And the prepaid tuition plans have hit some rough spots. As the New York Times reported not long ago, Tennessee closed its prepaid plan to new participants. The prepaid plan in Illinois drew scrutiny when Crain’s Chicago Business reported that the locked-in price wasn’t fully guaranteed.

The lesson is not to dismiss such plans. The lesson is to save as much as you can as early as you can, and to diversify your investments in the process. If you start a plan, think of it as an early first birthday present for your son or daughter.