How you save and invest depends on how old your child is now, your overall financial situation, the amount you have to invest, and the level of investment risk you're comfortable with. Once you've got your plan set, review it regularly to incorporate new information about college costs and the availability of financial aid. If you have more than one child, set up separate college funds to keep the investments appropriate for each one's age.

Here are some general suggestions based on your time horizon:

› Newborn to Age 8. The sooner you start to save the easier it will be, thanks to the power of compounding. For example, suppose a family wants to build a college fund of $50,000 for their six-year old child. If they start now and reinvest all their earnings, assuming an 8% pretax average annual return, they'll need to put away about $207 a month over the next 12 years. If they put off saving until their child is age 12, to reach their goal they'll need to save more than twice as much a month - about $543 - to reach their goal.

At this stage, your goal is to try to keep pace with the increase in college costs. With 10 to 18 years until freshman year, financial experts recommend that you stash the majority of your college savings in long-term growth investments, such as a diversified portfolio of stock mutual funds. While stocks are volatile over the short term, over the long run they have significantly outperformed other types of investments. The key is to focus on long-term results, not short-term ups and downs.

› Ages 9 to 13. With five to ten years to go, you still have time to take advantage of the growth potential of stocks, although you may want to favor more conservative stock investments, such as growth and income mutual funds. At the same time, decrease your college fund's volatility by investing in intermediate- and short-term bonds and bond mutual funds. At this stage, as well as earlier or later, some parents also like the certainty of prepaid tuition plans and college savings programs.

As high school approaches, gradually begin moving some of your stock investments into shorter-term, fixed-rate investments that guarantee the return of your principal and will mature when you need them. Consider Series EE Bonds, Treasury bills and notes, short-term Treasury zero coupons and CDs. That way all your money won't be tied up in volatile investments that could lose value just when you need to cash them in.

› Ages 14 to 18. At this point, your top priority is to keep your college fund safe and available. Continue to move your money out of stock investments into shorter-term, fixed-rate savings and investments with maturity dates staggered to match your annual college bills. Consider CDs, Treasury bills and notes, short-term Treasury zero coupons and money-market funds. Put new savings into these shorter-term vehicles too.

During the early years of this stage, however, you still have six or seven years left before that last tuition bill comes due. So consider keeping a small percentage of your fund in conservative stock investments to give your money a chance to grow.

If your college fund is coming up short, now's the time to consider major cost-cutting moves, such as buying a used car instead of a new one, taking shorter or less expensive vacations, or slashing your entertainment and clothing budgets. At the same time, start looking into financial aid and keep up-to-date on the annual changes in the rules and deadlines.