In tough times, the thought of paying your children’s way through college can sound daunting, but it’s something most of us hope to be able to do for our kids.

According to the University of Colorado Boulder Office of Planning, Budget and Analysis, incoming freshman who are residents of Colorado will pay more than $21,000 this year for tuition, fees and housing. Here are some steps that can help you create a college savings plan that considers your overall financial needs and goals. 

• Start early. With the cost of higher education continually rising, it's more important than ever to get an early start saving for your child’s college education.  The earlier you begin, the less you will need to save annually to reach your savings goals.  Plus, a longer time horizon will allow you to utilize investment vehicles that may offer greater returns, but are too risky for shorter time horizons.  Learn about potential risks associated with your investments and make sure they are appropriate given your child's age, risk tolerance, and how much time you have before you will need to access the funds.

• Save regularly. Saving and investing a fixed amount at regular intervals (weekly, monthly) is an effective way to save for college as it helps even out the ebbs and flows of investing at a particular moment and trying to time the market.

• Be smart about saving for college.  If you have large balances on high interest credit cards, make an effort to pay them off.  It is unlikely that the interest you would make keeping the money in your savings account would yield anywhere near the interest that you are being charged on your credit card debt.

• How much should you save?  This is a personal decision based on your family's philosophy as to who should pay for college. Each family needs to consider their individual situation and your financial advisor can help.  However, a general rule of thumb is to save the full cost of four years of college in the year the student was born, which translates into approximately one-third of the cost once your child reaches college age.  The second third of the cost might come from your current earnings while your child is in college, and the final third can be borrowed by a combination of parent loans and child loans.  Clearly, individual family incomes and the cost of various educational institutions vary widely.  These are very general rules of thumb that some financial aid officers have recommended.

• Save in tax-advantaged college savings vehicles.  College Savings Plans allow you to invest significant sums of money that can grow tax-free. You can set up an account for anyone—your child, grandchild, niece, or nephew—even yourself.  These accounts may grow larger than an identical taxable account where earnings are taxed every year. 

• 529 Savings Plans allow you to maintain control of the funds and contributions that grow tax-free. (Colorado offers three 529 college savings plans: CollegeInvest Direct Portfolio College Savings Plan is a traditional college savings plan along with the CollegeInvest Stable Value Plus plan, and Scholars Choice College Savings Program is an advisor-sold tuition plan.) If the child does not attend college, the account’s beneficiary can be changed. Dividends and realized capital gains are not taxed annually and continue to grow within the account.  Additionally, when the money withdrawn is used to pay for qualified education expenses, including tuition, fees, certain room and board expenses, supplies and equipment, it's free from federal income tax.

• If need-based financial aid is a consideration, save in the parent's name, not the child's. 

• When your child is two years away from college, consider converting most of the assets into less risky assets such as a stable value fund or FDIC insured certificates of college, depending on where the money invested is held and how they are titled.  

Jeff Nelligan is a Senior Vice President and Financial Advisor with the Global Wealth Management Division of Morgan Stanley in Denver, Colorado. He can be reached at (303) 572-4034 or jeff.nelligan@morganstanley.com . The information contained in this article is not a solicitation to purchase or sell investments. Any information presented is general in nature and not intended to provide individually tailored investment advice. The strategies and/or investments referenced may not be suitable for all investors as the appropriateness of a particular investment or strategy will depend on an investor's individual circumstances and objectives.  Investing involves risks and there is always the potential of losing money when you invest. The views expressed herein are those of the author and may not necessarily reflect the views of Morgan Stanley Wealth Management, or its affiliates. Morgan Stanley Wealth Management LLC. Member SIPC.