Just Opening a College Savings Plan Can Get Your Kids into College

Saving for college is a daunting task. Future cost estimates range from $80,000 at a 4-year, in-state public school in 5 years to $200,000 at the same school in 18 years. And private college tuition rates will be considerably higher. It’s enough to make parents just give up and not even try to save. But the good news is that a study by the College Savings Initiative reports that children who have their own savings account are six times more likely to attend college than those without one. And the best part? The amount of money in the account does not have to be large.

William Elliott III, a faculty associate with the Center for Social Development (CSD) at Washington University in St. Louis, says that the average balance in the savings accounts of the kids in the study was only around $400. The theory is that the savings account gives the children a sense of control and something concrete that helps gear them toward college. It’s more than just a nebulous idea that they should go to college one day. Having a tangible savings account gets them thinking and planning ahead, and it may also equip them with the sense of responsibility they will need in order to be successful at college.

This is one of three studies to come out of CSD that indicates a correlation between assets and college enrollment and completion. The College Savings Institute is a partnership between the CSD and the New America Foundation with the goal of improving access to and graduation from college for low to moderate income children.

One of President Obama’s goals is that by the end of the decade the United States will once again lead the world in college completion. Arne Duncan, the US secretary of education, announced a coalition between the National Credit Union Association (NCUA) and the FDIC to help promote financial literacy and college success for lower income families.

One of the pilot programs being tested in San Francisco is called Kindergarten to College. In 18 San Francisco schools, $50 will be deposited into a savings account for each kindergarten student; lower income students will be eligible for $100. To give parents incentive to contribute, a local non-profit foundation will match parental contributions up to $100 during the first year. And teachers are incorporating the savings accounts into their lessons to teach the children about financial responsibility. The goal is to put all children on the path to college.

So what does this mean to you as a parent? The takeaway from these studies and initiatives is that even a small amount of savings can have big effects. Trying to have all of the money you will need for college saved in advance is an overwhelming goal. But merely opening an account for your child can greatly increase your child’s chances of success in college.

Taking small steps, contributing as you can and allowing your child to also contribute and learn responsibility go a long way toward guiding them toward college. You will be helping them develop the qualities they will need to be successful not only in college but later in life as they set goals and take steps to reach them. Don’t feel like you have to do it all. Just take the steps that you can right now, and you will get there.

 

Jessica Bosari writes for Billeater.com, a site all about saving money on your bills, so you can have money for more important things, like your child’s college savings account.

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