529 Plans vs. Coverdell ESA: What's the Difference?

529 Plans vs. Coverdell ESA: Choosing What Is Right for You

By Adam Levy – Updated May 6, 2025 at 12:18 PM

Key Points

529 plans allow tax-free growth and withdrawals for education, plus a potential state tax deduction.
Coverdell ESAs offer wider investment options and expense eligibility, but have a $2,000/year limit.
529 prepaid plans lock in tuition rates, which could be useful given rising college costs, but restrict usage.

Saving for a child's education requires some important financial considerations, including whether to use a 529 plan or a Coverdell Education Savings Account (ESA). There are, of course, pros and cons to each tax-advantaged savings plan.

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Savings Account

A savings account is an account that earns interest with a financial institution.

But like all things in personal finance, the decision will come down to each family's individual circumstances. This article will present you with enough details to make an informed decision about the best way to save for your child's education.

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An infographic listing and explaining the five best college savings accounts. — Image source: The Motley Fool.

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Importantly, there's nothing saying you can't use both. If you want to use a Coverdell to help pay for education expenses while your children are in primary and secondary schools and a 529 to cover college expenses, you absolutely can.

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About the Author

Adam Levy is a contributing Motley Fool stock market analyst covering technology, consumer, and financial stocks and how policy, economic, and consumer trends shape personal finance, Social Security and retirement savings. Before The Motley Fool, Adam was a financial advisor at Edward Jones. He studied finance and electrical engineering at Carnegie Mellon University.

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