Are you talking about doing a 529 plan? If so, you can invest in any States 529 plan I think without any sort of penalty. Personally I love them for the basic reason is people (mainly family) give more to my kids than they normally would money wise because they know it is going towards their 529 plan. Sometimes they just give us a check on random days and tell us to put it in their 529 plans because they think that is the best investment for their money (grand kids and great-grand kids education). We have only been doing it now for about 3 years, both kids have a hefty amount already stored away and earning at a decent interest rate.
One last thing though, our financial advisor reminded us. Saving for your kids education is not a sound retirement plan. We always try to remember that when concerned about where to put our own money at.