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Saving money for the future might be a financial priority for you, but putting intention into action can be challenging. Perhaps you have multiple goals: an emergency fund, money for next year’s big vacation, and saving toward the down payment on a house. You may wonder how much to put towards each and how to keep those savings separated but growing steadily.

Enter the vault bank account. This kind of sub-savings account can help you stash cash for different dreams and needs while staying organized. Read on to learn more about vault bank accounts and how they can help you make steady progress toward your money goals.

What Are Vault Bank Accounts?

Also known as a sub-savings account, a vault bank account is a digital banking feature that allows you to safely tuck away money towards multiple goals. This cash is usually tracked separately from your main savings account balance, making it easy to keep tabs on your different savings targets.

However, these accounts are not available at all banks. What’s more, banks that do offer them vary in what they call them, and they may have slightly different nuances in how they function. The main purpose is to provide an easy way to set aside and track funds for your various savings goals. For instance, you could have a general savings account balance, a vault for your emergency fund, and a vault for cash that’s earmarked to buy a new laptop.

With a vault bank account, you can typically name each sub-account. You might call one “Paris trip” and another “Emergency fund.” In many cases, you can set target dates (by when you’ll have accrued a certain amount) and automate savings into the sub-accounts. That means a specific amount can be automatically transferred into the vault at a preset frequency.

The Advantages of Using a Vault Bank Account?

As you might imagine, a number of pluses come with a vault bank account.

•   Easy tracking of savings goals. Instead of having all your savings pooled into a single balance, your vault funds can be tracked separately from your main savings account balance.

For instance, you can create separate vaults for holiday gifts, vacations, home improvements, or to save for a car or home. A vault bank account makes it easy to see exactly how much you’ve saved for each goal. You can tell at a glance how much progress you’ve made by saving.

•   Streamlined savings. Besides making it easy to track your different goals, vault accounts mean you won’t have to open multiple bank accounts — which can be labor-intensive and involve various account fees and requirements.

•   Ability to automate your finances. By using recurring transfers, as noted above, you don’t have to fret about whether you’re steadily saving for that vacation, mountain bike, or wedding fund. Automating your savings keeps you moving right along to achieve your goals as your money grows via additional deposits and interest.

•   A motivation boost. Easily keeping tabs on your progress can keep you motivated to continue saving. When you see how much progress you’ve made after months of saving consistently, you’ll likely feel your sense of financial security soar.

•   Accessibility of your funds. When you’re ready to tap into your funds, a savings vault makes it simple to move the money from your vault to your checking account.

How to Transfer Funds Into and Out of Vaults

While it depends on the financial institution you have a savings vault with, moving money in and out of vaults should be pretty straightforward. Depending on the bank, you usually can transfer funds in and out of your vault to your checking account, main savings account, or external linked account.

For instance, you might first select the vault sub-savings account you’d like to move your funds into, then hit “Transfer,” and choose a linked account. You can typically pick either a one-time or recurring transfer when choosing your transfer. Then, click on “Next” to continue and complete the transaction.

Recommended: How Do Savings Accounts Work?

Are Vault Bank Accounts Secure?

As vault bank accounts are extensions of your savings account, they are protected up to the insured limits, just like with another deposit account, in the very rare instance of a bank failing. If your vault savings account is with a bank, it’s most likely insured by the Federal Deposit Insurance Corporation (FDIC), which covers up to $250,000 per depositor, per account ownership category, per insured institution. Savings vaults with credit unions are typically protected by the National Credit Union Administration (NCUA) up to $250,000 per depositor, per account ownership category, per insured institution.

Vault bank savings accounts are considered sub-accounts or accounts within an account. In turn, all the different funds within your savings are protected as a single account and are insured up to $250,000.

In addition, most banks have advanced, state-of-the-art security measures in place, such as encryption. You will likely be offered two-factor authentication, and it can be wise to use that feature.

Vault Bank Account Fees and Pricing

Pricing and fees for a vault bank savings account depend on the financial institution. Some may charge a monthly account fee and require you to keep a minimum balance in your savings account. There might also be inactivity fees and overdraft fees, among others. However, some vault accounts are free and carry no fees.

Recommended: Best IRAs for Young Adults

The Takeaway

A vault bank account can be a simple, streamlined way to save for different goals. It has sub-accounts you can dedicate funds towards for, say, rainy day expenses, a down payment on a house, or a big purchase, like new furniture. When shopping for a vault account, it’s important to be mindful of potential fees or account balance minimums. By finding one with no or minimal fees, more funds can be put toward your savings. For this reason, SoFi’s savings vaults can be a good option.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

What is a vault bank account?

A vault savings account is one that has sub-accounts you can use to set up separate savings goals. The money in these savings goals is separate from your main savings account balance, and you can typically label them and set target savings dates.

How can I transfer money from my vault to my available balance?

Moving money from your vault to your checking account is usually straightforward and quickly executed. This can easily be done through your mobile banking app.

Are vault bank accounts secure?

While no bank account is 100% secure, vault bank accounts are very safe. They’re usually backed by either FDIC or NCUA insurance, plus the security measures the bank deploys to protect your identity and finances.

Can I have multiple vaults in my bank account?

You can have multiple sub-accounts or vaults in your savings account, if your bank offers this feature. The maximum number of vaults varies by the bank, with some allowing up to 20 active vaults at one time.

Are there any fees for using a vault bank account?

Depending on where you bank, your financial institution might charge such fees as a monthly account fee, among others. Some might require that you keep a minimum balance. However, there are also banks that provide this type of account with no or low fees, so it can be wise to shop around and read the fine print.

Photo credit: iStock/HuiLiu

SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 11/12/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

SOBK-Q224-1857797-V1

If you’re looking for a place to safely store (and grow) money you don’t need right away, a savings account could be a great choice. These accounts are typically federally insured, pay interest on your deposits, and allow easy access to your funds when you need them.

That said, savings accounts also have some downsides. The interest rates can be low and may not keep up with inflation, which means your money could lose spending power over time. Many savings accounts also put limits on how often you can access your refunds, such as six withdrawals or transfers per month.

Depending on your needs and savings goals, a savings account may or may not be your best option. Here’s a look at the pros and cons of a savings account, plus alternatives that could be a better choice for growing your nest egg.

What Is a Savings Account?

A savings account is a deposit account held at a bank or other financial institution that earns interest over time. These accounts are designed to help people save money while providing easy access to funds when needed. This makes them well-suited for emergency savings and money you’re setting aside for an upcoming goal like a large purchase or vacation.

Unlike checking accounts, which are primarily used for daily transactions, savings accounts are intended for longer-term deposits, and you may be limited to a certain number of transactions you can make each month, such as six or nine.

Savings accounts at banks in the U.S are typically insured by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000 per depositor per institution. In the case of joint accounts, each co-owner can get up to $250,000 in FDIC coverage across their joint accounts at the same bank. Savings accounts at credit unions have similar protections through the National Credit Union Administration (NCUA).

Recommended: Reasons to Keep Money in a Savings Account

Savings Account Pros and Cons

Savings accounts offer a range of benefits, as well as some drawbacks. Understanding these can help you make an informed decision about whether a savings account is the right choice for your needs and goals.

Pros

•   Earns interest: Savings accounts earn interest, which means your money can grow over time. The interest rate is expressed as an annual percentage yield (APY), which tells you how much you’ll earn on your deposits over one year, including compound interest. APYs vary depending on the bank and the type of savings account. Online savings accounts generally offer higher APYs than traditional savings accounts.

•   Safety and security: Funds in savings accounts are usually federally insured. This means you’re protected (up to at least $250,000) if the bank were to run into financial trouble or shut its doors.

•   Liquidity: While not as liquid as checking accounts, savings accounts still allow easy access to your money. You can withdraw money or transfer it to other accounts relatively easily and quickly.

•   Low or no opening deposit required: Unlike some savings and investment vehicles, you can often open a savings account with little or no money. Many online banks have no minimum deposit requirements; traditional banks may require a deposit, but it’s often as low as $25.

•   Encourages saving: By keeping money in a savings account separate from your daily spending funds, you may be less tempted to spend it. Some institutions allow you to set up an automatic transfer from your checking account to your savings for a set amount on a set day (such as right after you get paid). This allows you to save without thinking about it.

Recommended: What Is a Long-Term Savings Account?

Cons

•   Variable interest rates: The interest rates for savings accounts aren’t fixed, which means they can vary with the federal funds rate, the benchmark rate set by the Federal Reserve. If the Fed raises the federal funds rate, APYs on savings accounts tend to increase. However, if the Fed lowers rates, your savings account APY may go down.

•   Relatively low returns: Compared to other investment options, savings accounts generally offer lower interest rates. This means your money grows more slowly than it might in higher-risk investments. As of May 20, 2024, the national average yield for savings accounts is 0.45%. However, many online banks have savings interest rates higher than the national average for savings accounts.

•   Limited transactions: A federal rule called Regulation D used to limit withdrawals from savings accounts to no more than six a month. That changed in April 2020 when the Federal Reserve announced that it was removing the requirement that banks enforce the limit. Even so, banks and credit unions have largely kept restrictions in place.

•   Inflation risk: The interest earned on savings accounts may not always keep pace with inflation. Any time your savings isn’t growing at the same rate as inflation, you are effectively losing money because the real value of your money is diminishing.

•   May have minimum balance requirements: You might need to keep a certain amount of money in your savings account in order to avoid monthly maintenance fees and/or earn the top interest rate.

Savings Accounts vs Checking Accounts

While both savings and checking accounts serve essential roles in personal finance, they have different purposes and distinct features.

Checking accounts are designed for spending money. Therefore they generally offer little to no interest, come with debit cards, and allow unlimited transactions. Savings accounts, on the other hand, are set up to encourage saving. They pay interest on your deposits, don’t come with debit cards, and may place some limitations in how, and how often, you can access your cash.

Here’s a look at how these two accounts types compare side-by-side.

Is a Savings Account Right for You?

Whether a savings account is right for you depends on your financial needs and savings goals. A savings account could be the right place to stash your cash if you are:

Building an emergency fund: Due to its liquidity and security, a savings account can be a good place to keep your emergency savings.

Saving for a short-term goal: If you are saving up for a goal that is a few months to a few years in the future — such as a vacation, home improvement project, or a down payment on a car —- a savings account can be a great option.

Looking for low-risk savings: If you prefer a low-risk place to store your money while still earning some interest, a savings account can make sense. Just keep in mind that for mid- to long-term savings goals (defined as roughly five years or more), investing in the market may be more appropriate, though there is risk involved.

Recommended: How Much Should I Have in Savings?

Choosing a Savings Account

Savings accounts are offered by different types of financial institutions, including traditional banks, online banks, and credit unions. There are also many different types of savings accounts, including traditional savings accounts and high-yield savings accounts. Which to pick?

When choosing the right savings account for your needs, it helps to consider the following factors:

•   Interest rate: APYs offered by savings accounts can vary widely, so it pays to shop around. While rates are generally low, some institutions offer higher rates, particularly online banks.

•   Fees: Ideally, you want to open a savings account with no (or very low) fees. Be sure to check if there are any requirements to avoid fees, such as maintaining a minimum balance.

•   Accessibility: Consider how easy it will be to access your funds and if the account comes with any limitations on how many withdrawals or transfers you can make per month. You may also want to look for accounts with user-friendly online and mobile banking options.

•   Insurance: You’ll want to make sure that the institution offering the savings account is insured by the FDIC or NCUA.

Recommended: Understanding High-Yield Savings Accounts

Alternatives to Savings Accounts

A traditional or high-yield savings account isn’t the only place to put your savings. Depending on your goals, you may want to consider other options. Here are some alternatives.

•   Money market accounts (MMAs): MMAs often offer higher interest rates than traditional savings accounts, plus a debit card and/or check-writing privileges. However, they might require a higher opening and ongoing minimum balance.

•   Certificates of deposit (CDs): CDs typically offer higher interest rates than traditional savings accounts in exchange for locking your money in for a set period of time (anywhere from a few months to a few years). They can be a good option if you don’t need immediate access to your funds. However, you may be able to find a high-yield savings account that offers the same or better APY with fewer restrictions.

•   Investment accounts: For longer-term goals, you may want to consider investment accounts like individual retirement accounts (IRAs), mutual funds, or stock portfolios, which can offer higher returns but come with greater risk.

•   Treasury securities: U.S. Treasury securities, such as bonds and bills, are low-risk investments backed by the federal government. They offer different maturity terms and interest rates.

SoFi Savings Accounts

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

What are the cons of a savings account?

Savings accounts, while beneficial for many reasons, do have some drawbacks:

•   Relatively low interest rates: Savings accounts generally offer lower interest rates compared to other investment options.

•   Limited transactions: You may be limited to six withdrawals and transfers per month. Exceeding this limit can result in fees.

•   Inflation risk: The interest earned may not always keep pace with inflation, potentially reducing the purchasing power of your savings over time.

•   Opportunity cost: Funds in a savings account might earn less compared to higher-yield investments, representing a missed opportunity for greater returns.

What is the benefit of a savings account?

Savings accounts offer significant benefits. They provide a safe and secure place for your money (since your deposits are typically insured up to $250,000). These accounts also earn interest, allowing your money to grow over time, albeit often at a modest rate. In addition, savings accounts offer easy access to your funds when needed. And many come with minimal or no fees, though a minimum balance may be required.

Is it worth putting money in a savings account?

Yes, putting money in a savings account can be worth it, especially for specific financial needs. For example, savings accounts can be the ideal spot for building an emergency fund due to their safety, liquidity, and ease of access. They can also be a good choice for short-term savings goals, such as vacations or major purchases. Since interest rates are relatively low, however, they are generally not ideal for long-term savings goals like retirement or a child’s college fund.

Photo credit: iStock/Ridofranz

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 11/12/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SOBK-Q224-1857774-V1

There are many different ways you can save for education expenses, and each one comes with its own pros and cons. Depending on your situation, you may want to explore 529 college savings plans, Roth IRAs, or education IRAs — also known as Coverdell Education Savings Accounts (or ESAs).

Education IRAs — more commonly called Coverdell ESAs today — provide a tax-advantaged way to save for primary, secondary, and higher education expenses. Unlike 529 Plans, you can only save $2,000 per year, per beneficiary in an ESA, and your contribution limit is determined by your income.

What Is an Education IRA, or ESA?

Despite sometimes being called an education IRA, this is not a retirement account like a traditional IRA, but is rather intended for education-related expenses, including tuition, tutoring, books, and more.

It’s possible for a parent to consider using retirement funds to pay for college, but it’s generally unwise to compromise your own retirement.

Fortunately, there are many tax-advantaged ways to save for a child’s education. It’s even possible to use an education IRA in combination with a 529 plan, especially if you’re looking for creative ways to save for college.

ESA Basics

It’s important to know that different rules apply to each type of educational account. For example, parents, grandparents, and other individuals can open ESAs on behalf of an eligible beneficiary (the student) and make annual contributions.

But contributions are not tax deductible (as they sometimes are when creating a college fund, depending on the state); and contributions are limited to $2,000 per year, total, per beneficiary. So, if a grandparent opens an ESA for a child, and an uncle opens an ESA for the same child, the total contribution amount per year in those two ESA accounts cannot exceed $2,000.

The perks of a 529 savings plan include: No annual contribution limits; no income limits; contributions are tax deductible in some states. But you can only use up to $10,000 in 529 funds for primary and secondary education expenses.

How Do Education IRAs Work?

ESAs have two primary people involved — the custodian, who manages the account, and the beneficiary, or student. The custodian sets up the education IRA and manages the funds on behalf of the student beneficiary.

An education IRA is a self-directed account, where the custodian can invest the money in assets like stocks, bonds, real estate or mutual funds. The appreciation and interest earned in an education IRA is tax-deferred, which means that appreciation is not subject to tax on capital gains or income. Distributions for qualified educational expenses are also not subject to taxes.

ESA Rules

Here are a few of the rules for setting up education IRAs (i.e., Coverdell ESAs):

Funds Must Be Contributed Before the Beneficiary Turns 18

All funding to an education IRA must be contributed before the beneficiary turns 18 years old, unless they’re a special needs beneficiary per the IRS.

Funds Must Be Distributed Before Age 30

You must distribute all funds in an education IRA before the beneficiary turns 30 (again, this doesn’t apply to those with special needs). However, the custodian may name a new beneficiary if there are still funds in the account when the original beneficiary reaches age 30.

Contribution Limits

Each account may only receive $2,000 in funding each year, total. Additionally, if your modified adjusted gross income (MAGI) is between $95,000 to $110,000 ($190,000 to $220,000 for those filing jointly), you can contribute a partial amount, not the full $2,000. If your MAGI is above $110,000 (or $220,000 for joint filers), you are not permitted to contribute to an ESA.

Tax-free for Qualified Expenses

While contributions are not deductible, assets in an education IRA are considered tax-advantaged, which means you do not pay any capital gains or income tax over time on the money within the account. And as long as you withdraw the money for qualified education expenses, you won’t pay any taxes on the withdrawals either. Nonqualified withdrawals, however, are subject to taxes and a 10% tax penalty.

Pros and Cons of an Education IRA

*This does not apply to special needs beneficiaries.

Alternatives to Education IRAs

Here are a few alternatives to education IRAs:

529 Plans

A 529 plan is one of the most common ways that people save for college and other educational expenses. Earnings in 529 plans are also tax-deferred and qualified educational expenses can be withdrawn tax free, but in contrast to education IRAs, 529 plans have no limitations on the age of the beneficiary.

Roth IRA

You can also set up a Roth IRA for a child as a way to save for higher education expenses like college. While a Roth IRA is mostly intended for retirement savings, it can also be used for higher-education expenses because you can withdraw your contributions at any time (but there are restrictions on withdrawing investment earnings from a Roth before age 59 ½ ).

High-Yield Savings Account

It is also possible to put some or even the majority of your college savings money in a high-yield savings account. While you lose some of the tax advantages that come with Coverdell ESAs, IRAs, or 529 plans, you also have more flexibility since the money in a savings account can be used for any purpose without penalty. Also, these accounts are typically FDIC insured.

FAQ

Is an education IRA the same as a 529 savings plan?

While education IRAs (now called Coverdell ESAs) and 529 savings plans are both ways to save for education expenses, they are not the same thing. The aggregate contribution limits for 529 plans are much higher than they are for an ESA, so you could save more — and you’re not required to stop making contributions once your child turns 18.

What are the benefits of an education IRA?

An education IRA allows you to save money for a beneficiary and watch that money grow tax-free. And as long as you withdraw that money for qualified education expenses, you won’t ever have to pay income tax or capital gains tax on that money.

What is the income limit for an education IRA?

Education IRAs do limit who can make a contribution based on the adjusted gross income (MAGI) of the donor. Currently, the income limits for an education IRA are $95,000 for single taxpayers and $190,000 for married taxpayers. Single taxpayers with an MAGI of $95,000 to $110,000 and joint filers with an MAGI of $190,000 to $220,000 can contribute a lesser amount due to a phaseout rule. Single taxpayers and join filers whose MAGI exceeds $110,000 and $220,000, respectively, are not eligible to contribute to an educational IRA.

Photo credit: iStock/Jacob Wackerhausen