What Is a Coverdell ESA?

By Matthew Frankel, CFP – Updated Sep 13, 2025 at 4:45 PM

Key Points

Coverdell ESAs offer tax-free growth on investments for educational expenses.
Contributions to Coverdell ESAs max at $2,000/yr, less than most 529 plans.
Investment options in Coverdell ESAs are more flexible than in 529 plans.

When it comes to saving for college, there are several different types of accounts you can use. The two account types that are specifically designed for college savings are the Coverdell ESA and the 529 savings plan. Of the two, the Coverdell ESA is less familiar to many Americans, so here's a rundown of what a Coverdell ESA is, the advantages and drawbacks, and how much you could potentially save in a Coverdell ESA.

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college savings money in jar — Image source: Getty Images.

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About the Author

Matt Frankel, CFP, is a contributing Motley Fool stock market analyst and personal finance expert covering financial stocks, REITs, SPACs, and personal finance. Prior to The Motley Fool, Matt taught high school and college mathematics. He holds a bachelor’s degree in physics from the University of South Carolina, a master’s degree in mathematics from Nova Southeastern University, and a graduate certificate in financial planning from Florida State University. He won a SABEW award for coverage of the 2017 Tax Cuts and Jobs Act. He is also regularly interviewed by Cheddar, The National Desk, and other TV networks and publications for his financial, stock market, and investing expertise.

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Matt Frankel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Microsoft. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.