While higher education is more vital than ever in this increasingly competitive economy, college tuition is also more expensive. In the last quarter century, college tuition has risen faster than personal income, consumer prices and even health insurance. Even state schools—long considered a haven of affordable education—aren’t exempt. According to usatoday.com, there has also been a 35% jump in state tuition and fees within the last few years .

The good news is that a wide range of tools exists to help parents pay for college, including special savings programs, investment vehicles, scholarships, and financial aid programs. By starting financial planning early in your child’s life and investing wisely, you’ll be prepared when that first tuition bill comes due. If you’re unsure whether you’ll be able to pay for the full amount of your child’s education, or if you’ll need to look into financial aid and scholarships, read this guide to understanding your student loan options.

Here’s an overview of some of the best ways to pull together a college nest egg:

Roth IRAs. If you’re already funding your retirement through a 401(k) or similar plan, a Roth IRA might be a good vehicle for college savings. Depending on your annual income, you can contribute up to $5,000 annually. Earnings in your account grow tax-deferred so long as distributions are used toward qualified college expenses. Keep in mind that these funds are considered parental assets, which can impact financial aid eligibility.

Coverdell Education Savings Accounts. Formerly known as Education IRAs, Coverdell ESAs work like Roth IRAs – after-tax dollars grow tax-free until you’re ready to use them. Contributions must be used toward qualified education expenses, including tuition, housing, and books. What’s great about the Coverdell ESA is that “education” also includes public or private primary and secondary education. Also, anyone can contribute on behalf of your child as long as they meet certain income limits; right now there’s a $2,000-per-child annual limit. Coverdell funds are considered the student’s asset, which could impact financial aid eligibility, particularly involving grants.

State college “529” savings plans. While they vary by state, these college savings plans offer amazing flexibility--no income restrictions, contribution limits (over $200,000 annually per student in some states), or geographic restrictions (you can contribute to any state’s plan, regardless of where you live, and use the money for any college you choose). Withdrawals are exempt from federal tax and many states offer state income tax breaks, too. Because of the wide array of 529 plans available, consider hiring a qualified financial advisor familiar with current offerings. These funds are also considered parental assets that could be counted against financial aid eligibility.

Scholarships and grants. While it’s wise to save for college rather than assume your child will earn scholarships, it’s equally smart to research existing grants and other awards that could offset your child’s education costs. Scholarships are typically awarded to students based on educational or athletic prowess or to those who demonstrate financial need. Check your local library or high school for scholarship reference books, or look online for searchable online databases like CollegeNet.com (but don’t bother with sites that charge a fee to search for scholarships).

The Bottom Line: When taking on any sizeable financial task such as college funding, it’s smart to do your homework. By being flexible and taking advantage of the wide range of available college savings options, you’ll be able to build a future your children can count on.