Education Savings Accounts (529 and Coverdell ESA)
A 529 is the account most families use to save for college, trade school, or other qualified education costs. Money in it can grow, and qualified withdrawals can come out tax-free. A Coverdell ESA is the smaller, less common account: yearly contributions are capped, and it can also pay some kindergarten-through-grade-12 costs. Neither one is a retirement account, and neither one is a loan.
If a relative offers to open “a college account,” ask which kind it is and what happens to the money if you get a scholarship or change your plan.
Related Lessons
