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Formerly called Education IRAs, Coverdell Education Savings Accounts now boast a less confusing name and more generous contribution limits. The annual limit is $2,000 per child, making Coverdells an attractive option for many families.
Coverdells work just like Roth IRAs, except they are intended to be used for education expenses, not retirement. Like the Roth, contributions aren’t deductible, and earnings are never taxed (as long as withdrawals are for education expenses). What’s more, any investment that can go into an IRA can also go into your Coverdell, including stocks, bonds, CDs and mutual funds.
One point that is often overlooks: Though usually intended for college, Coverdells actually can be used for just about any education expense, including private elementary and secondary schools.
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