Many 529 plan sponsors have made this relatively simple with target funds that are pegged to a specific year or age. You pick the fund that corresponds roughly to the year your child will enter college, and the fund managers periodically reallocate the assets to get more conservative as college approaches. Although it's always a good idea to monitor the fund's performance, the plan sponsor does a lot of the heavy lifting for you -- and it helps take any emotion out of the process.

Alternatively, you can generally pick from a selection of portfolios that match your risk tolerance -- ranging from conservative to aggressive. Always make sure you understand the rules for switching among the portfolios offered; some plans limit the number of changes you can make.

The Fine Print

Before investing in a 529 plan, always carefully consider the plan's investment objectives, risks, charges and expenses, which can be found in the plan's agreement. Plan details do vary from state to state, or even plan to plan.

Final Thoughts

I know it's hard to contemplate investing after the recent declines in the stock market and ongoing disconcerting economic news. But don't let the recent past cloud your thinking about long-term goals like college for your children (and retirement for yourself). As you should with any financial objective, look at your timeframe, and look at the ways you can get the most out of your savings. I continue to suggest 529 plans as a good way to proceed, particularly if your children are young.