Encyclopedia of Investment Terminology

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Coverdell Education Savings Account

A Coverdell Education Savings Account or ESA is an account that works according to IRS code 530 to work with saving money for a child’s education costs. Money can be deposited into a Coverdell ESA and the money can grow in a tax deferred state. It can be withdrawn without taxes for when money needs to be spent for a benefactor’s education. What makes this different from a 529 plan is that it can work for paying for primary and secondary education costs along with higher education costs. Limits are involved each year for this ESA and investments involving mutual funds and stocks can be used.

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