Mrs. H071 is right that setting aside the money is important. Just like your retirement fund, this is crucial. Set aside between 5-10% of your net income of your family.
Next, see if there is a registered educational savings plan that you are eligible for. In Canada, for instance, we have the registered educational savings plan, in which we can place instruments in that are excluded from taxation each year.
Then determine what level of risk you are interested in. Chances are that you wish to small-medium growth as this fund will be used within 5-15 years and your risk tolerance is quite low, so indexed/mutual funds are probably the best route.
No matter what though, if the market is up or down, you should purchase to the extent of of the percentage you determined of your salary. Here's why: when the market goes low, and you are buying always on a fixed dollar amount, you are actually buying more, so when there is a gain, you will receive it....everything will average out if your investment strategy is sound.
As your children get older, set them up so that 5% of their income is set for retirement and 5% is set for their education so they can see how money works, take responsibility for their lives and get some serious money compounded over the years.
Best of luck!
