In the past few months, we’ve talked about investing in stocks, bonds and real estate. This month, we’ll discuss saving for your children’s higher education.

Before you put money away for your children’s college costs, make sure your own finances are in good shape. Make sure that you have six to 12 months of living expenses in cash or fairly liquid assets available for emergencies. Then make sure that you have saved and will continue to save adequately for retirement. Finally, if you have high-interest debts, pay those off beforehand.

If you are ready financially to help pay for your children’s college education, you have four basic options. First, you can put money in a bank or brokerage account. The advantage is flexibility in that you can use the money however you want to use it. The disadvantage is that you get no tax benefits at all.

The second option is the prepaid tuition plan. The advantage is that you can lock in today’s tuition rate, but the disadvantage is that these plans are very restrictive — there are a limited number of colleges that your child can attend.

The third option is the Coverdell Educational Savings Account. The advantage here is that you can withdraw the money tax free if you use it for qualified higher-education expenses. The disadvantages are that you can only contribute $2,000 a year, which is not much considering the cost of college education these days and the fact that you can’t contribute at all if your joint filing income is above $220,000.

The fourth and probably best option is called the 529 Plan. Created in 1996, the 529 Plan has numerous advantages. First, you can contribute $13,000 per parent, or $26,000 per couple, each year. The maximum you can contribute is more than $300,000 — more than enough to cover most college educations.

In addition, if you choose, you can contribute five years of contributions at one time ($130,000). There is no income limit to contribute to a 529 Plan, and withdrawals are state- and federal-tax free if used for qualified higher-education expenses. The only disadvantage is that the money contributed cannot be withdrawn without penalty, and the funds are subject to investment risk.

• Andy Su, MD is an emergency physician who works full-time at the Sutter Tracy Community Hospital Emergency Department and a Board Member of the Tracy Hospital Foundation.