A Coverdell Education Savings Account is an account set up at a bank, brokerage firm or

A Coverdell Education Savings Account is an account set up at a bank, brokerage firm or financial institution to pay for college for the named beneficiary. You can invest your contributions in most types of financial assets except life insurance contracts.

There is no tax deduction for contributions, but the money grows tax free and remains tax free when you take it out as long as it’s used for qualified education expenses. These expenses include tuition, fees, books, supplies, and --- if the student is enrolled at least half time – room and board. The money also can be used to pay for public, private or religious elementary or high school expenses.

You can open more than one Coverdell for a child, but total contributions to all accounts combined can’t exceed $2,000 a year. Contributions end at age 18 except for special needs students. Contributions phase down starting at $95,000 in income for single filers and $190,000 for married filing jointly. No contributions are allowed when income exceeds $1100, 000 (single) or $220,000 (joint).

Keeping money in a Coverdell account (instead of another type of account) generally won’t hurt your chance of getting financial aid.

If the account is not depleted by age 30, any earnings that remain will be taxed as ordinary income, plus a 10 percent penalty. A Coverdell account can be rolled over into a Coverdell account for another family member.