You're on the right track for your kids education. There are two main routes to go if you want some type of tax advantage. One is a 529 Plan, the other is a Coverdell, also called an Education Savings Account (ESA). They have a few differences, primarily that 529 plans are sponsored by each state and, as a result, have different options available by state. You don't have to reside in the state of the 529 plan you choose, so it requires a little more homework to know what you get with each 529 plan. Some of the top state 529 plans are listed in Clark Howard's 529 Guide.
The Coverdell, or ESA, is an account type held at a brokerage, similar to an IRA. You have more flexibility with investment options, but contributions are limited to $2,000 per year per child. That money grows tax-free if used for qualified education expenses, meaning you don't get any deduction for contributions to the account, but when you take the money out, you'll pay no tax on your gains if you use the money for education. Amounts can also be used for qualified K-12 education expenses. Another point is that if the first child does not use the full amount in the ESA, it can be transferred tax-free down to another sibling. There is also no restriction on where you invest the money. It is much like setting up an IRA in the sense that you can set it up at almost any institution and invest in any fund, stock, or bond.
529 plans have the same federal tax benefit when used for education (no tax on gains when withdrawals are taken) and may also include a state tax benefit, depending on your state of residence. 529 plans typically allow you to contribute much more than an ESA and may have age restrictions, but those are different for each state's 529 plan. If you decide to go this route, just make sure you read the details of any restrictions, which may include which funds you can purchase. Fees are also a consideration as some 529 plans also have their own fees, which you won't find with an ESA.
With both of these, if the money is not used for education, you'll pay an extra 10% tax penalty, so you want to be sure that you will use the funds for education. Remember that retirement savings should always come before education since you can find other sources to fund education expenses, even including loans, but you can't get a loan for retirement. So make sure you are already maxing out all your retirement savings vehicles such as 401(k)s and IRAs first (preferably by contributing at least 15% of your gross income to retirement savings).
Here is another blog post I wrote with similar info: Why I Like Coverdell Education Savings Accounts
Bottom line: the decision may come down to how much you plan to, or can, invest for education since the ESA has the $2,000 limit, but the ESA also has the most flexibility and no additional fees. If you want to contribute more than that, a 529 plan is probably best, but you'll need to do a little research to find one with appealing investment options yet still keeps fees low.