Any parent or guardian can open an ESA on behalf of a child and contribute to it. Friends, relatives—even children—can contribute to the account. Contributions may be made to more than one ESA benefiting a child in any given year, but the total contributions to all of that child's ESAs may not exceed $2,000 a year. These investments can be applied to a child's education at any level. Although your contributions aren't tax-deductible, your earnings grow tax-free and withdrawals are free from federal income taxes when used for qualified education expenses.

The amount a person can contribute gradually declines based on modified adjusted gross income levels between $95,000 and $110,000 if single, or between $190,000 and $220,000 if married and filing jointly.