Will savings in a Coverdell account affect a student's chances of receiving financial aid?

If I open a Coverdell education savings account for my child, will that affect her chances of receiving financial aid in the future?

It may. Financial aid administrators consider money in a Coverdell education savings account to be the child's assets, and expect children to contribute about 35% of their assets to pay for college. Money in a 529 savings plan, however, is considered the parents' assets, and parents are expected to contribute only 5.6% of their money for college.

But that's no reason to avoid opening a Coverdell. The tax savings are still quite valuable: You can withdraw the money tax free for education expenses. And unlike a 529, funds in a Coverdell aren't limited to college costs. Instead, you can spend the Coverdell money on educational expenses while your child is in elementary or secondary school. Eligible expenses include the cost of tuition and fees, tutoring, books, supplies, uniforms, computers, and educational software — whether your child is in public or private school.