I’ve reviewed both options as saving plans for college, see the links below:

• Considering A Coverdell Education Savings Account?
• My 529 College Savings Experience
• 529 College Saving Plans – Part 2

I personally went with the 529 plan instead of the Coverdell ESA!

Why:  The Coverdell ESA at one time only allowed an incredible small amount ($500.00) to be the maximum that you could contribute to the plan per year.  I thought that was crazy, so I chose my state 529 plan.  Now they have bumped up the maximum contributions amount to $2,000.

With a 529 I also like the fact that since I opened the plan, I’m in control of it.  With an ESA, the beneficiary gains control once they turn 18.

I do like the ESA’s investment options!  Basically it’s like having a brokerage account that you can trade investment vehicles in it.  With 529s, you are limited to the mutual funds and investement options identified within the plan.

So the question is, if I were to choose today, which would I choose?  It’s a harder decision, but I would probably still go with the 529!  Another perk is the deductibility of the 529’s contributions from my state income taxes.

If you have some real investing skill, you might do better with a ESA.  However, I would still consider contributing some money to a 529 plan, because contributing only $2,000 a years (especially if you start contributing late), just doesn’t seem like it’s enough.  The important thing is to start though, every little bit helps! Who knows, you may suprise yourself.