While you may be convinced that your budding little genius is going to get into Harvard on a full ride when she's ready for college, the truth is that tuition -- and all of the associated costs -- is getting more and more expensive, and getting into college, much less on a full ride, has become much more competitive.
Beginning to save for your child's college may be unrealistic while he's still in diapers, but it is a good time to start thinking about it. A 529 plan is a college savings plan operated by states and educational institutions. You set up a plan and designate your child as the beneficiary. You, or anyone, can then contribute to that plan. When your child is ready for college, he can use the money for qualified expenses including tuition, fees, computers, books and even room and board. Earnings are not subject to federal tax -- and most often not to state tax either. Keep in mind, though, that contributions to a 529 are not deductible.
Plans vary, and you don't have to set up a plan in your state. Do some research to find a plan that offers the benefits you need. And rest easy. If your genius does get a full ride to Harvard, the funds can be transferred to a sibling or other beneficiary to help fund that child's education [source: IRS].