Coverdell Education Savings Account (CESA)

A CESA is similar to a Roth IRA, but it is designed to pay for education, not retirement. You can contribute up to $2,000 per child, per year with post-tax dollars. The money grows tax-free, and neither the contribution nor the earnings are taxed when you make a withdrawal, as long as you use it for education-related expenses. These accounts may be used for children grades K-12, as well as for college education, but funds must be used or rolled over to another beneficiary by the time the benefactor reaches age 30, unless your child has special needs. Families with children in a public or private school can use the money to pay for books, supplies, after-school programs, tutoring, and even home computers and Internet service. As with an IRA, you have until April 15 of next year to make a contribution that counts toward this year’s taxes.