With all of the other things you have to worry about, thinking about how you will pay for your child's college education may be at the bottom of the list. However, if you consider that using current estimates, the cost of college will likely be more than $30,000 a year for a public college and more than $70,000 a year for a private college by the time that your new baby is ready to start school, you may already be behind if you haven't started saving yet.

Of course there are alternatives if you are unable to pay for your child's college expenses, such as loans, grants, scholarships, and other types of financial aid. Or your child may be able to work part-time as she goes to school, or attend a community college. But if you want to be able to financially support your child so she can attend the college of her choice, the earlier you start saving, the easier it will be.

Prepaid Tuition Programs

Prepaid tuition is a popular option for many parents. This type of plan, often called a 529, is an education savings plan with special tax benefits. It allows you to fund one or more years of tuition now, to be used when your child is ready to start college. Unlike many other types of plans, these state prepaid tuition programs are guaranteed to pay for college in the future, even as tuition prices go up. Besides the many tax advantages, another benefit is that other family members, such as helpful grandparents, can contribute to the plan.

There are two downsides of prepaid tuition programs: they only pay for tuition (you will still have to save for room and board), and not all states offer them. Also, for states that do offer them, the cost is likely to continue to increase each year, so paying for the plan as early as possible is a good idea. Keep in mind that prepaying your child's tuition at one school doesn't necessarily mean that she has to go to school there. Many plans allow you to transfer your money to another school.

College Savings Programs

College savings programs are another type of state 529 plan, into which you can contribute money to pay for college later. Unlike the prepaid tuition programs, there is no guarantee that the invested money will be enough to pay for all of your child's expenses. On the other hand, you can use the money for tuition, room and board, and any other college-related expenses. They also have low minimum contribution limits, which can make it easier for you to start saving for your child's college education.

More Alternatives

Alternatives to Section 529 college savings plans and prepaid tuition plans can include starting a Coverdell Education Savings Account (formerly known as an Education IRA) or a Uniform Transfers to Minors Act (UTMA) account, or purchasing U.S. Savings Bonds to pay for your children's college expenses. Other traditional investments, including stocks, mutual funds, and real estate, are more options. They don't usually offer the tax advantages of the other programs, though. In general, a 529 plan is going to be the easiest to set up and maintain. Talk to a financial advisor if you aren't sure which option is best for you.