If you plan on giving them albums later on in life, I suggest you start making separate ones now. What I do is i have my "family" albums... just regular photo albums (three to a page) and write in the memos on the side. For that one i print out all my photos and they go in there... in order and i just keep continuing the albums in order. Everything is dated and ages are written in. For my kids (2 & 4), i do scrapbooking albums. I just got a digital camera about 13 months ago so this is much easier for me! when i get my pictures printed, i pick a few for each event or whatever and get copies made for them (not all of them, just a few from each... and that is hard! picking them!). I am very far behind on scrapping BUT i do have my photos organized for them in those photo boxes in order. My family regular albums are updated as i print.
I sign up for places like cvs.com or kodakgallery and stuff like that... every so often they run 10 cent print specials! Now the pictures that i have from my regular film camera, it was easy when i had one kid b/c i always got doubles, but since the second one came I have them in a box w/ the negatives so i can get reprints! lol. lots of work! anyway, on the computer my digital pictures are kept in several folders. I start with the main folder "family photos 2008" then i have subfolders for every month. also, when i save my photos for the file name i always start with the month "april 2008, kids party" something like that. i also put their ages 2y4y so i know for me. Before they go in these subfolders they go into a "to put online" (in my online albums to send to family) and then moved to "to print" once they are printed they get moved into their specific months. Then i save on a cd by month and put in the fire safe. I am ocd and am way too organized but it makes for easy find of photos!!!
i also label the back of every picture I have printed. names, dates, ages, etc. that way you know who it is and the year, etc. i learned b/c my mom had these very old photos of her family and some of them we didn't know who was who b/c her parents passed away and we were stuck! then my mom unexpectedly died (age 44) when i just turned 24 and a lot of her photos (tons of them!!!) have no ages or dates and my dad only remembers so much as far as the specifics go (moms are so much better at this!)
good luck! it will be worth it in the end! i LOVE pictures and am always looking back. my kids both love going through the albums and even my pics as a kid, and that gives them a chance to get to "know" the grandmother who died before they had a chance to get to know her (my oldest was only 3 months old) through the stories in the photos.
good luck!! sorry about writing a book!