A:

You can contribute to both, and when your child is ready to attend college, as colleges do accept payments from both. There are some features and benefits that may make one account more favorable than the other.

For instance, the Coverdell education savings account (formerly Education IRA) may be used for education costs for private school, kindergarten through grade 12, and for higher education. The 529 plan assets may be used for higher education expenses only.

(For further reading on this topic, see Choosing The Right Type Of 529 Plan, Investing In Your Child's Education and Don't Forget The Kids: Save For Their Education And Retirement.)

This question was answered by Denise Appleby
(
Contact Denise)

RELATED FAQS
  1. What are the risks involved in a banker's acceptance?

    Learn about the different kinds of college savings accounts, how they can benefit a college saver and how to open these savings ... Read Answer >>
  2. A parent would choose to set up a Coverdell Education Savings Account for a child ...

    A parent would choose to set up a Coverdell Education Savings Account for a child in order to save for college expenses AND: ... Read Answer >>
  3. What is the best way to save for private school expenses? A 529 plan, a Coverdell ...

    If the goal is to put the money in the plan towards private school expenses, then the Coverdell Education Savings Account ... Read Answer >>
Related Articles
  1. Taxes

    Tax-Smart Ways To Help Your Kids/Grandkids Pay For College

    Learn about plans and accounts that allow you to efficiently save for your child or grandchild’s education while shielding the savings from the IRS as much as possible.
  2. Managing Wealth

    Education Savings Account Tutorial

    This comprehensive guide goes through what an Education Savings Plan is and how to set one up, contribute to it and withdraw from it.
  3. Managing Wealth

    Choosing The Right 529 Education Savings Plan

    Before you fund one of these education-savings vehicles, be sure you know their differences.
  4. Personal Finance

    5 Ways to Save and Pay for College

    College tuition is expensive. Here are five ways to save and pay for college.
  5. Taxes

    Clearing Up Tax Confusion For College Savings Accounts

    Put your kids through school without being hounded by the tax man.
  6. Retirement

    4 Smart 529 Plan Alternatives to Consider

    Learn about some alternatives to the popular college-saving 529 plan that may also make sense, such as prepaid tuition plans and Coverdell accounts.
  7. Financial Advisor

    Why Coverdell ESAs May Trump 529 Plans

    Coverdell ESAs still trail 529 plans in popularity by a wide margin due to their low contribution limits. But these accounts can be a viable alternative.
  8. Investing

    Spoil Your Grandkids, Cut Your Tax Bill

    Helping your grandchildren save for college is a way to spoil them and reap some benefits yourself.
  9. Managing Wealth

    529 Plan Tutorial

    This comprehensive guide goes through what a 529 plan is and how to set one up, contribute to it and withdraw from it.
RELATED TERMS
  1. Education IRA

    A savings plan for higher education. Parents and guardians are ...
  2. Form 1099-Q

    An IRS form that an individual who receives distributions from ...
  3. Educator Expenses Deduction

    An above-the-line deduction for teachers and other education ...
  4. Non-Qualified Distribution

    1) A distribution from a Roth IRA that occurs before the Roth ...
  5. American Accounting Association - AAA

    An organization that supports worldwide excellence in accounting ...
  6. Canada Education Savings Grant - CESG

    A grant from the Government of Canada paid directly into a beneficiary's ...
Hot Definitions
  1. Fixed-Income Security

    An investment that provides a return in the form of fixed periodic payments and the eventual return of principal at maturity. ...
  2. Free Cash Flow - FCF

    A measure of financial performance calculated as operating cash flow minus capital expenditures. Free cash flow (FCF) represents ...
  3. Leverage Ratio

    Any ratio used to calculate the financial leverage of a company to get an idea of the company's methods of financing or to ...
  4. Two And Twenty

    A type of compensation structure that hedge fund managers typically employ in which part of compensation is performance based. ...
  5. Market Capitalization

    The total dollar market value of all of a company's outstanding shares. Market capitalization is calculated by multiplying ...
  6. Expense Ratio

    A measure of what it costs an investment company to operate a mutual fund. An expense ratio is determined through an annual ...
Trading Center