1. Get an idea of what your child's education will cost in the future
Given a five percent annual rate of inflation on college costs, your child's college tuition, room, and board could easily set you back twice (or even thrice) what you paid for your own college education. You can get a more comprehensive idea of what both two year and four year private and public universities (in-state or out-of-state) will cost in the year that your child will enroll from The College Board's College Costs Calculator.1
2. Calculate the costs of raising a child (or two)
If you're an expectant parent, you might not have a fully-fledged idea of what the costs of regular child care, food, and other necessities will actually run you on a monthly basis. The USDA calculations are based on data generated from their 2015 Expenditures on Children by Families report.2
3. Start a 529 College Savings Plan
Once you have researched what your children's education will cost, and how much having a child will cost you, you'll probably have a good idea of how much you can allot to their college savings each month. A dedicated 529 Savings Plan is one of the most tax-beneficial and efficient ways to build a college fund for baby. If you choose to set money aside in a regular savings account, you could be missing out on tax benefits on baby's college savings.
4. Give yourself a refresher on financial aid lingo
It may not seem particularly urgent, but you should familiarize yourself with contemporary financial aid lingo and make an effort to understand how the college application process works. It's good for parents to have a thorough understanding of what kind of financial aid options are available to both them and their children, just in case that 529 Savings Plan doesn't actually fund itself in 18 years' time, or baby doesn't turn out to be an actual baby genius.
5. Inform your family about the best ways to contribute to baby's college fund
Doting grandparents, aunts, and uncles might be anxious to assist you with plumping up your baby college fund. If they express an interest in contributing, be sure to inform them about the most tax-beneficial ways to gift money for college. And don't forget to deposit those personal checks into your college fund for baby when birthdays and major holidays roll around.
If you'd like to learn more about starting a 529 College Savings Plan for your baby, or you'd like to ensure that you're not saving for college the wrong way, there's a ton of helpful college-planning info on offer in our Protective Learning Center.
NOTE: As of 2018, the IRS has amended the term “qualified higher education expense” to include a limited amount of annual expenses from a 529 Plan for tuition at an elementary or secondary public, private, or religious school. Source: www.irs.gov/newsroom/529-plans-questions-and-answers.