If you have kids and you're saving for their college, there's a salesperson trying to separate you from your money.

After being on the air for more than two decades, what's old becomes new again. Lately, I've been hearing an oldie resurface: Parents are getting pitches from life insurance agents claiming that the absolute best way to save for your kid's college is to buy life insurance.

The idea is you buy a policy on your kid and then they've got life insurance down the road in the event of their premature death. When they make it to college age, there's this wonderful tax loophole that allows you to borrow from the policy's cash value to pay for college.

But Smart Money  magazine and I are in agreement: The idea stinks and there's a much better way to get the job done. It's called a 529 plan and it has definite benefits over a life insurance policy to pay for college.

From a tax angle, every penny you save in a 529 plan is tax free when spent on college. A life insurance policy, by contrast, is only tax advantaged. In my book, tax free beats tax advantages seven days a week!

Which is more cost effective? Again, the 529 plan wins. The embedded costs in life insurance policies can be massive because they're padded with commissions for the salesperson.

Worse still, consider this: If you can't pay the premiums on a life insurance policy, the policy lapses and you're wiped out. There's no money there to tap for college. With a 529 plan, however, if you hit a rough patch and can't contribute any longer, the contributions you've made to date remain to grow and be spent tax free at the time of college.

Just be sure to buy 529 plans direct, not through a commissioned salesperson. If you need help getting started, check out my 529 guide.

Editor's note: This segment originally aired Nov. 2, 2011