A Roth IRA can be used to pay for higher education, but only the original contributions can be taken out penalty free and tax-free. Using earnings in a Roth IRA for college avoids the 10% penalty, but does not avoid income tax. If you want to avoid paying taxes, you can only take out your contributions, thereby getting no growth on your money. The Coverdell IRA is not subject to income tax, although there are lower contribution limits. There are lots websites which compare the various savings alternatives, highlighting advantages and disadvantages, as well as addressing financial aid ramifications. While not a finance website, this site about babies is a very good place to start:
http://www.babycenter.com/baby/babyfinance...babycollegeBkmk