Families interested in saving for college have a variety of options over where to save their money, maybe too many options. This page describes some of common options and provides links for more information. The information on this page is provided for educational purposes only and does not imply an endorsement of any specific financial product or service.
What Types of Accounts Can We Use to Save for College?
Common savings options include 529 plans, savings accounts dedicated to college savings, U.S. Savings Bonds, and Coverdell Education Savings Accounts (ESAs). Each of these options is described below, and links are provided for more information. UW-Madison Division of Extension has developed a more detailed comparison chart that describes core features of each type of account, along with this fact sheet (also available in Spanish).
Named for a part of the tax code, 529 plans offer potential tax savings when you save and use money for eligible higher education expenses. Wisconsin has two plans, Edvest and Tomorrow’s Scholar. Any adult, living in or outside of WI, can open up an Edvest account with a minimum of $25. Tomorrow’s Scholar is only available through financial advisors and fee-only planners. The State of Wisconsin’s 529 website, 529.wi.gov, provides more information. Savingforcollege.com also provides information on Wisconsin and other states’ 529 plans.
Savings account dedicated to college savings
Savings and related accounts (for example CD’s) may be used to save for college. It may be helpful to set up an account dedicated to college savings, rather than using an existing savings account. More information is available from finaid.org/savings and americasaves.org.
U.S. Savings Bonds
When used for eligible college education expenses, all or some of the interest earned from U.S. Savings Bonds may be tax free. TreasuryDirect.gov is the government’s official website for learning more about and purchasing Savings Bonds (look for “EE” and “I” Bonds). The federal government provides information about using Savings Bonds for education expenses in Publication 970.
Coverdell Education Savings Account (ESA)
Formerly known as Education IRA’s, a Coverdell ESA is an investment account used to save for qualified elementary, secondary, or college education expenses. More information is available form the Internal Revenue Service along with the organizations FinAid and Saving for College.