You know college is expensive. Some financial advisors have recommended families set aside as much as 4 percent of their annual income just to handle their child’s total college expenses. So, how do you assemble enough money now to pay for that eventual bill for room, board and tuition?

Moms and dads can get a big lift up on college finances by way of ScholarShare College Savings Plan. It is a program run by the State of California that permits parents – or parents, or even friends, for that matter – to invest in stocks or bonds and hopefully earn a decent enough return to build up an adequate funding source. The beauty of it is that earnings that come out of the program are free of taxes, both at the state and federal level.

“You get the benefit upon redeeming or withdrawing your money,” Julio Martinez, executive director of the ScholarShare Investment Board, told Growing Up in Santa Cruz recently.

Basically, it works like this: An adult contacts ScholarShare (800- 544-5248, or www.scholarshare529.com) to set up an account on behalf of your future student. Accounts are opened online, or by mail. You have to decide on what kind of investment to fund. Currently there are 19 different investment portfolios, and you can choose one mutual fund, or a grouping, or a fixed income option. The most popular choices are age based, said Martinez. This selection starts out with relatively aggressive investing options in the student’s younger years and then becomes more conservative as the first day of college approaches. This approach is just like aged-based portfolios offered by many 401(k) plans.

“Essentially, you set it and forget it,” said Martinez of the aged-based option. You have the ability to change the portfolio mix at any time. All the funds are managed by TIAA, the giant financial services firm that specializes in investments for academic and government bodies. You can mail in a check, auto debit from your bank account, or set up periodic transfers. There even is a payroll deduction plan available from some employers.

The smallest amount needed to open an account is $25. From there, you can contribute for one student, over the lifetime of the account, a maximum of $475,000. ScholarShare decided that was the cap based upon the anticipated cost of seven years of undergraduate and graduate-level schooling at California’s priciest college, Harvey Mudd College in Claremont (its tuition alone for the 2018-19 academic year is $56,331). But while you cannot contribute more than that amount, earnings can push it over that limit penalty free.

Once your child hits college, you can withdraw money out of the pro- gram for qualifying expenses such as tuition, or student housing. The drawdowns are free of taxes, both at the federal and state level. That’s where the relief for parents comes in. If you put aside $100,000, for instance, and over time it grew to $125,000, that extra $25,000 carries no tax consequence.

Unlike some states, California does not grant any tax break to money invested upfront in these plans (they are called 529 plans after that section of the Internal Revenue Code that pertains to them). Also, California does not permit 529 plan funds to be used for K-12 expenses, which is a new option allowed at the federal level courtesy of the 2017 tax law.

Overall, Californians have opened 305,000 ScholarShare accounts, with an average balance of around $29,000. While that may not get you very far at Harvey Mudd, it’s at least a dent in the bill. And it’s a recognition by state and local governments that they can encourage people to save now, and save often, for one of the most consequential investments you’ll ever make.