Glossary

C

• Capitalization

  A company’s capitalization is the market value of the company’s total outstanding securities minus the company’s liabilities. Companies are divided into one of three groups, based on capitalization: small-cap (less than $2 billion), mid-cap ($2 billion to $10 billion) and large-cap ($10 billion or more).

• Certificate of Deposit (CD)

  A CD is a savings certificate that pays a fixed interest rate over a fixed period of time. CDs are usually issued by banks. A penalty may be charged for early withdrawal before the CD reaches maturity.

• College Savings Plan

  General term for an account used to save for college, like a 529 account or an education savings account (ESA).

• Compounding

  Compounding intensifies the power of investment growth and earnings by adding the growth and earnings to the principal balance of the account. For example, reinvesting interest and dividends in a mutual fund is a form of compounding. Compounding increases the rate of growth of an investment.

• Contribution

  A contribution is a transfer of funds to a 529 plan account, by the account owner or by others such as family members and friends. A contribution is considered a gift for tax purposes.

• Cost of Attendance (COA)

  A college’s COA is the total cost of attendance for one year. It includes tuition and fees, room and board, books, supplies and equipment, transportation and miscellaneous/personal expenses. The cost of attendance may also include disability-related expenses and dependent care costs.

• Coverdell Education Savings Account (ESA)

  A Coverdell ESA, formerly known as an Education IRA, is an education savings account. Coverdell ESAs allow a family to save for K-12 and college costs. Various rules limit the amount that can be contributed to such an account as well as the timing of distributions.

• Custodial Account

  A custodial account is a savings account that is controlled by an adult until the beneficiary reaches the age of majority, at which point control of the account transfers to the beneficiary. UGMA and UTMA bank and brokerage accounts are examples of custodial accounts. The custodian of such an account may establish a 529 plan account on behalf of the beneficiary. See also: UGMA and UTMA.

• Custodian

  A custodian is an adult who controls a custodial account.