A five-step college savings plan for parents and students

For students, being admitted to college is the result of years of preparation. Completing college prep courses, participating in extracurricular activities and accumulating community volunteer hours - all are important components to impressing college admissions boards.

While this hard work is essential, just as important is having a plan to finance that education. For parents with small children, reviewing the various college savings options and developing a plan to start saving now can help ensure the money is there when it comes time for college.

For parents of teens, it's a good idea to sit down with them to discuss the importance of saving for college. Chances are, they'll want to help contribute once they start earning their own money. In fact, according to the 2011 Annual College Saving Survey released by TD Ameritrade, Inc., saving for college is the top financial priority of teens age 14 to 19, and 68 percent of teens said they are saving a portion of their own money for college.

As college tuition costs continue to rise, paying for college today can be challenging. Having a plan can help. Lule Demmissie, managing director of Investment Products and Retirement at TD Ameritrade, suggests the following five steps for developing a college savings plan:

1. Start early. Even if you can only afford to put a small amount aside, getting an early start allows your money to start working for you long before the first tuition bill comes. If you plan on having your student contribute, teach her why saving is important, and when she gets that first summer job, help with a plan to set a certain amount aside after each paycheck.

2. Set goals. Set a goal for how much money you would like to have saved by the time your student enters college. Then establish how much you would need to save each year to accomplish that goal. If you could use some help determining these goals, TD Ameritrade's College Planner allows you to plug in expected tuition costs and provides projected annual amounts that you would need to save to accomplish your goals. The website's WealthRuler can also help parents determine how college savings fits into the big picture of planning for retirement.

3. Select your education savings vehicle. Once you've set your goals, the next step is choosing the savings plan that will best help you accomplish them. Compare the features of popular plans, such as a 529 College Savings Plan, a custodial account or a Coverdell Education Savings Account. The IRS website provides information on the tax benefits of different types of savings plans.

4. Monitor your progress. By regularly checking on your savings progress, you can measure whether you are on track towards meeting your goals. This can also be an important learning opportunity for your student as you help him discover how savings plans work.

5. Consider asking for help. Enlisting a financial adviser to assist you with building a plan for investing and paying for college is one way to get help pursuing your goals. A professional can help you set a budget, as well as provide advice on college investment tools for your particular situation.

Investing wisely in your child's education helps your student focus on getting a quality education instead of worrying about how to pay for college. And when you and your child discuss a savings plan together, you're giving him or her a savings lesson that can be passed down to the next generation.