How much should I put in a 529 plan?

Q: I have just opened a 529 plan for my grandchild. How much money should one put into this account? Do you consider this a wise step? My grandchild is 7 years old.

A: A 529 plan is a great way to save for college, as long as you are in a plan with reasonable costs. Here's one site where you can compare plans.

How much to save depends on where your grandchild is likely to go to college. T. Rowe Price has a college cost calculator and other college savings tools on its Web site. You can give $12,000 a year to anyone without gift tax consequences ($24,000 if the contribution comes from both you and your spouse.) And if you are giving to a 529 plan, you can give five times that amount (essentially spreading your gift over five years.)