It’s never too early to begin investing for your child’s future. Whether you have a new baby or a toddler running around the house, it’s worth coming up with a plan. Even if you only put away a small amount each month, every bit can make a big difference later. (See: Investing $50 a month could add up nicely for your retirement)

The first step is learning about account types. Below are five common account types you could choose from to fit your investing plan.

When saving for your child’s education, you may prefer an account that offers a tax-deferred investment option for the money you save. Three of the most popular tax-advantaged account types are:

Coverdell Education Savings Account (CESA) are not taxed on withdrawal, if you use the money for eligible education expenses.

• Save up to $2,000 per child, per year toward education expenses, as long as you are within the income limits.

• Use the money on eligible K-12 expenses or college costs and distributions from the account are tax free. (See: Start your education savings with a Coverdell Plan)
  

529 Plans are also not taxed upon withdrawal, if you use the money for eligible education expenses.

• Either pre-pay education costs or contribute to a tax-deferred savings account. Most 529 Prepaid Tuition Plans are sponsored by state governments and require you to be a state resident to be eligible.
  

• Money contributed to a 529 Savings Plan is not deductible from your current federal taxable income, but earnings within the Savings Plan are tax deferred, and some states may offer state tax benefits.

• When you open a Prepaid Tuition Plan account, the money you contribute is converted to units or credits to be used for college and university education.

• When you open a Savings Plan the contributions grow tax deferred and may be withdrawn tax-free if that money is used to cover eligible education costs for the beneficiary.

• In addition, you may take up to $10,000 per year in tax-free withdrawals per beneficiary to pay for tuition expenses at private, public and religious K-12 schools. (See: How to Choose a 529 Educational Savings Plan)
  

Roth IRAs allow you to withdraw the basis (the money you contributed) first. The basis would not be taxable upon withdrawal because those dollars were already taxed before they entered the Roth IRA account.

• This may be the most flexible option for parents who are unsure how much they’ll be able to contribute to their child’s education without harming their own retirement.

• Use funds from a Roth IRA to cover your child’s qualified educational expenses. You would face a 10% penalty for withdrawing investment earnings beyond your total contributions before age 59½ if the money is used for your retirement needs. However, you wouldn’t face that same penalty if the money were used for your child’s qualified educational expenses. Note, the basis is withdrawn first, so it is not taxed. If you’re 59½ and it has been 5 years or longer since you first contributed to the account, you also wouldn’t be taxed on earnings. However, if you don’t meet that criteria you would have to pay income tax on the investment gains.

• You can open a Roth IRA and start contributing at any time as long as you or your spouse have earned income and meet the income requirements.

• After establishing a Roth IRA, you can wait until your child is ready to start college to determine whether to use it toward their educational expenses. If your retirement is well funded, you may opt to spend your Roth savings on educational expenses instead of retirement.
  

General investment account. A general investment account is a convenient and flexible way to invest. While not specific to saving for a child’s education, this type of brokerage account is an option for investing for both long- and short-term needs. If you want to invest to cover a child’s costs in addition to education, such as sports or school activities, this type of account provides a more flexible option.

• If you’ll need the money in the short-term, consider investing in a low volatility investment, such as a money market fund.

• For the long-term, you may consider a more aggressive fund such as a stock fund or asset allocation fund. (See: Thrivent Equity Funds)

UTMA Custodial Account. A Uniform Transfers to Minors Act (UTMA) custodial account lets you establish and manage assets for your child, including stocks and other securities.

• Once the account is established on behalf of your child, the assets are considered irrevocable gifts that belong to them.

• Although contributions are unlimited (the contributions are considered gifts and fall under the annual gift exclusion rule), you can invest them in any of Thrivent’s mutual funds.

• The money must be used for the benefit of your child—and isn’t limited to just education costs.

• Any investment income belongs to your child and it may be subject to the “Kiddie Tax”. Just know that once your child reaches the age of majority (generally age 18 to 21, depending on the state), the account must be turned over to them and they’ll have access to the funds for any purpose. (See: UTMA plans)