You can setup an education IRA (ESA) for your children under the age of 18. The income in the IRA is tax-free if spent on qualified education expenses prior to age 30. Qualified education expense include private elementary and secondary schooling, and college expenses.

The maximum annual contribution is $2,000 per child, there are ways around this limitation. Contributions to an ESA are limted to taxpayers with income below a certain threshold, again there are ways around this limitation.

ESA's allow the you to buy and sell almost any type of investment, wheras Sec 529 plans you are limited to mutual funds and the changes in strategy. This allows the freedom to speculate with any gains completly taxfree regardless of holding period.

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