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College Savings Accounts

With the increasing costs of a college education, it may seem impossible to save enough money. Even if you can save only a small amount each month, the result could be a nice college fund for your child. Two common college savings plans could help you move toward your savings goal. The chart below provides more information.

  529 College Savings Plan Coverdell Education Savings Accounts

The 529 College Savings Plan is an investment account. You can deposit as much money as you want each year. The account grows based on market returns.

Learn about New York State's 529 College Savings Program                        

The Coverdell Education Savings Account (ESA) is an investment account where the assets are used for college expenses. You can usually set an account up at almost any brokerage firm or financial institution. It is similar to the 529 College Savings Plan in that it has investment options where you decide what to buy and sell in order for your account to grow.


  • You can withdraw money tax-free as long as you use it for college expenses.
  • The money can be used at schools outside your state of residence.
  • The plan is open to adults and children so there are no age limits per grade (account can be for an 18-year-old attending first year at college or a 48-year-old).
  • There are plenty of investment options available and you only need $25 to start.
  • No bank account is needed and minimum deposits per month can be set up automatically.
  • It provides more investment options than the 529 plan since there are no restrictions on the kind of investments you can make.
  • In addition to paying for college, you can make tax-free withdrawals from your ESA to pay for private elementary and high school expenses, as well as post-secondary school expenses.


  • The account is subject to market fluctuations. If the market declines, your funds will decline, as well.
  • Can only save post secondary education expenses for specified person on account.
  • New York State residents can enroll in 529 plans from other states but they may not be able to get State tax advantages.
  • You can contribute only up to $2,000 a year; whereas, 529 plans allow you to contribute as much as you like.