Overview of the Coverdell Education Savings Account

The Coverdell education savings account is a way to save money for a child's qualifying education expenses. It falls under the same section of the tax code as does the individual retirement account, so it shares the misnomer "IRA." Because it falls under rules similar to those of IRAs, the account has tax-savings benefits to encourage persons to save for education expenses.

Coverdell education savings accounts use tax-free growth of money to fund a child's education. Although the contributions may not be deducted, interest, dividends, and capital gains earned within the account are not taxed.

However, for these benefits, there are contribution rules and penalties on non-qualified withdrawals. As with other IRAs, rollovers between Coverdell education savings accounts are allowed.

The Coverdell education savings account is a convenient way to start saving for a child's education.

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