The savings account is the account in which you invest your money for future use. There are many different types of savings account that will help you to save money for your children future or for their education. One of the savings accounts is the Coverdell education savings account, and this is an account that will help to save your money efficiently and effectively. The Coverdell education savings account is mainly a college savings option that is much better than other savings account. This account comes with a higher return of tax and allows all the funds to be used for the education.
There are some basic rules for opening education savings account let’s have a look:-
- Under age 18
An education savings account is only available for the children that are under the age of 18 years. Also, contributions can also be made after the age of 18 years.
- Contributions and taxes
The total contributions that can be made per year are fixed in a savings account and if the contribution limit exceeds then the tax is applied on your savings. Make contributions that are fixed then no tax are deductible from your education savings account. In The Canadian Business Journal, you will learn more about the contributions and taxes.
- Expiry date
Till the beneficiary is not 18, he doesn’t have any control over the money distribution. But after 18, he doesn’t need any permission to access the funds and also the money distribution is tax-free.
To open the savings account, Coverdell education savings account is the only type which is considered best for education. As it allows money to be spent on college education and allows children of above 18 to be responsible for their withdrawals and penalties.