Many couples save money for their childrenâs college educations. Often they save this funding in regular bank accounts or through 529 plans. To max out the savings for their children’s educations, parents should look into opening Coverdell Education Savings Accounts (ESAs) for their kids, giving them the ability to save $2000 per child per year. The Coverdell ESA can pay for all kinds of school expenses from elementary school through college.
Common expenses covered by the Coverdell ESA account include:
* Tuition and fees
* Books and supplies
* Room and board for part-time or full-time students
* Academic tutoring
* Computer equipment, Internet access, etc.
Although contributions are non-deductible, accounts are able to grow tax-free and families can withdraw up to $2,000 per year for qualified expenses for each child. April 15 is the deadline to open a Coverdell ESA during any tax year.
“As the cost of educating a child increases and as more school districts pass along extracurricular fees to families, having an investment-based, tax-free source of income for these expenses becomes more important,” said John Liu, President and CEO of Firstrade. “The greatest benefit of having a Firstrade ESA versus a typical CD or savings account is that the investment can be managed directly by the account holder, and the return on investment can be far greater as a result.”
About the Experts:
Firstrade is a leading online brokerage. For more information, please see www.firstrade.com.