A. If your income falls within the limit, you could invest Coverdell first, which has an annual limit of $2,000 per student. 529 has a much higher limit.
When comparing Coverdell and 529, each has its own pros and cons. Some major ones are below:
- Coverdell gives you more flexibility in managing how your money invests, you could buy stocks, bonds, ETFs, etc. While 529's investment options are a lot more limited.
- Coverdell money can be used for private schools as well, and 529 is only limited to colleges.
- Coverdell counts more (20%) than 529 (5.6%) at time of financial aid calculation.
- Coverdell becomes the child's property when he or she turns to 18.
For other comparisons, please visit our earlier blog posts on Coverdell and 529, as well as 529 vs. Whole Life as education funds.