(StatePoint) The overwhelming majority of families agree that college is an important and worthwhile investment, yet fewer than half are saving for it, according to “How America Saves for College 2015,” a recent study by Sallie Mae and Ipsos.
Why the reluctance to put aside money for something deemed so important by so many?
“One of the greatest obstacles for families to overcome is simply getting started,” says Charlie Rocha, executive vice president, Sallie Mae. “We know those who have a plan and save are more likely to attend college, more likely to graduate, and will do so with less debt.”
With a focus on saving, planning and paying for college, the experts at Sallie Mae recommend a 1-2-3 approach. First, open a savings account; second, set a goal and regularly contribute money; and third, explore tax-advantaged savings options.
College can be expensive these days, so it is never too early to get started — no matter the age of the college-bound student. Open a savings account as soon as possible, earmarked for education.
The ideal savings account should have no fees, and be FDIC-insured, offering perks that help you stay motivated, such as no minimum balance, cash back rewards and tools to track goals and share progress.
An account specifically designed for college savings, such as the new Upromise GoalSaver, can get families on the right track. It offers a competitive APY and a rewards program that includes cash bonuses, matching rewards and other cash back rewards from more than 850 retail partners. For more information, visit www.UpromiseGoalSaver.com.
Goals and Contributions
Check out rates of tuition, room and board, and other expenses at the schools of your choice, so you can set realistic goals and target dates for reaching them. Motivation can be derived from progress, so within your savings account consider itemizing smaller benchmarks that are more easily achieved than one lump sum — such as textbooks, an emergency fund and a living expenses goal or specific savings goals for each child.
Applying the old adage, “Set it and forget it,” to your college savings can make saving a habit you don’t have to think about often. You can do so by linking a bank account to your savings fund, like Upromise GoalSaver, to make recurring direct deposits on a monthly or biweekly basis.
Some people keep themselves focused on savings by sharing goals over social media. Like losing weight or training for a marathon, research shows that making a goal public is associated with a higher chance of achievement. Some savings accounts even make sharing goals easy.
Tax Advantaged Savings Plans
After getting started with a simple savings account like Upromise GoalSaver, supplement your savings plan with a tax advantaged savings account, such as Coverdell Education Savings Accounts, prepaid state plans or 529 college savings plans. Such plans can offer such benefits as annual non-deductible contributions so that your account can grow without being subject to federal income taxes.
A college education continues to be overwhelmingly important to American families. Don’t limit future possibilities with inaction today.