What type of accounts can be set up to allow for tax-deferred savings for education?

Education Savings Accounts are specifically designed to facilitate tax-deferred savings for educational expenses. These accounts, such as Coverdell Education Savings Accounts (ESAs), allow individuals to contribute funds that can grow tax-free. Withdrawals used for qualified educational expenses, such as tuition, fees, books, and other necessary supplies for elementary, secondary, or post-secondary education, are not subject to federal taxes. This characteristic makes Education Savings Accounts a beneficial option for families planning for educational costs.

Other account types, while having various tax advantages, do not serve the same purpose. For instance, Health Savings Accounts are aimed at covering medical expenses, while Retirement Accounts focus on saving for retirement. General Investment Accounts do not offer tax-deferred growth but are subject to taxes on earnings and capital gains, making them less efficient for saving specifically for education.