The cost of educating a child can be daunting—so much so that it often becomes a family affair.

If you are saving for a grandchild's education, several approaches can be taken. The Coverdell Education Savings Account and a 529 college savings account are two that can be used by parents and grandparents.

The much-changed Coverdell Account retains some limited advantages for those who already have one. Here are the basics:

Currently individuals, corporations, partnerships, trusts, and tax-exempt entities may contribute $2,000, in cash only, into an account for a beneficiary who is under age 18 or a special-needs child. But after 2012, only individuals may contribute that $2,000.

If your modified adjusted gross income is over $220,000, filing jointly, you may not contribute. Thus, high-income taxpayers may no longer channel contributions through corporations or partnerships after 2012. The beneficiary may still be able to make contributions.

The $2,000 maximum is applicable to each beneficiary, regardless of how many accounts or how many contributors there are. Having two or more accounts, or having two or more contributors, doesn't yield an advantage.

For tax years 2011 and 2012, contributions may be made when you file your tax return. Starting in 2013, contributions must be made by year-end.

There is no federal tax deduction for making a contribution to a Coverdell Education Savings Account.

There is no federal tax deduction for a 529 savings account, either. However, a contribution to the more-advantageous 529 college savings account does at least give you a deduction on your state tax return in almost all states.

Earnings on these accounts are not taxed inside the accounts. With an Education Savings Account, you may invest the funds inside the account as you choose.

Withdrawals from these accounts are tax-free if they are used for qualified college expenses such as tuition and fees, books, supplies and equipment, or room and board. However, for the Education Savings Account, these distributions are also tax-free if used for elementary and secondary school until 2013. If your grandchild is now attending private grade school and you already have an account, you may withdraw tax-free to pay the private school tuition and avoid paying tax on the earnings. In addition, you may withdraw tax-free to purchase textbooks or a computer for school use, or to pay for tutors, extended day programs, or Internet access.

Here's the crux: Beginning in 2013, your distributions are no longer tax-free if used for elementary or secondary school. They are then restricted to college if you are to avoid paying tax on the earnings. That definitely throws the advantage to the 529 college account.

Let's say Johnny's private grade school tuition is $5,000. Pay the $5,000 tuition from the education savings account to use it up.

What if you already have an education savings account but don't have qualified expenses to use it up? You may roll the account into a 529 college account. As long as you directly roll it into a 529, you won't have to pay taxes on the move.