Since college tuition rises faster than inflation, no other investment will keep pace long-term as well as stocks. Avoid gimmicky college savings products that tie your money up in insurance policies, bank certificates of deposit or annuities. You will be much better off with a simple investing plan that uses a mix of stocks, bonds and cash.

Keep your investments simple, and stick to mutual funds that have solid three- to five-year track records and low expenses. You can even opt to have the fund company make automatic monthly withdrawals from your bank account to force you to save.

Most planners recommend that you base your asset allocation on your child's age. If your child is eight or younger, you can keep 60 percent to 95 percent of your money in stocks. You can choose a balanced fund, which holds a prescribed ratio, usually 60-40, of stocks to bonds. Or you can choose your own mix of funds and invest proportionately. For help in finding the right mix for your savings goal, try CNNmoney's Asset Allocator.

When your child is between ages nine and 13, your portfolio should get more conservative, not by moving money out of your earlier investments, but directing more of your new contributions to bond funds and tamer stock funds. For example, if you were putting 90 percent of your contributions into stock funds, and 10 percent into bond funds, switch to a 50-50 allocation. And if you want to curb the volatility that stock funds can create, put your contributions into equity-income funds, which invest in stocks paying high dividends and tend to ride market dips better.

When your child turns 14, start to shelter the returns you've earned so far. You can do this by moving 20 percent to 30 percent of your equity assets into money market and short-term bond funds every year, so that by the time your child enters college, you are out of equities entirely and you can cash out quickly.

If the bond portion of your savings has exceeded $10,000, you may consider purchasing government short-term Treasury notes directly from the U.S. Treasury, to avoid paying any management fees to a fund company.

Next: Tax-savvy savings options