COLLEGE SAVINGS 101

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Annual College Savings Survey results: An opportunity to educate
http://www.savingforcollege.com/articles/an-opportunity-to-educate

Posted: 2014-03-28

by Kathryn Flynn

The purpose of the Annual College Savings Survey was to give us a better understanding of American families’ behavior and opinions toward saving for college. As we revealed in our last blog post, misconceptions regarding 529 college savings plans continue to run rampant, especially among those who are not currently investing in one. This led us to wonder if reluctance toward using 529 plans could be due to a lack of knowledge about their functionality.

New Responsibilities

As 401(k) plans continue to replace defined benefit pension plans, more workers are forced to make their own investment choices when saving for retirement. Similarly, as college costs continue to surpass record levels, parents are faced with new dilemmas on how to properly invest to save for their children’s tuition. How are Americans handling these new financial responsibilities? According to the Employee Benefit Research Institute’s 2014 Retirement Confidence Survey, workers’ confidence about being able to save for a comfortable retirement is at an all-time low. Furthermore, 36 percent of workers surveyed had less than $1,000 in retirement savings. Our College Savings Survey revealed that of the 70 percent of those who currently do not have a 529 plan have not even started saving for college.

How Can We Learn?

Experts agree that there is a strong need for education on financial products and services, and that the younger these topics are introduced, the better. The President’s Advisory Council on Financial Capability For Young Americans was formed to develop ways to educate teenagers and young adults on personal finance. One resource they provide is the Money As You Grow program, which identifies important financial lessons and activities tailored to children of various age groups. Parents can also find numerous articles, apps and software available that offer creative ways to instill financial values in children. We’ve even started a Pinterest board to collect ideas on teaching kids about saving.

Follow us on Pinterest to see all the great resources we've gathered!

Will Our Children Be Prepared?

Many people also feel that financial literacy programs should be mandated in public schools. According to the Council for Economic Education’s 2014 Survey of the States, only 17 states require high school students to pass a personal finance course in order to graduate. The rest are left to go on to college or the workforce with little warning regarding the consequences of not saving money or maxing out credit cards. While learning something is always better than learning nothing, some argue that the courses being offered are too broad and are not getting the message across.

What Our Survey Revealed

Our College Savings Survey brought to our attention that the biggest areas of confusion regarding 529 plans have to do with their effects on financial aid and ownership rights. 36 percent of those surveyed believed that savings in a 529 plan will not affect financial aid eligibility, when in fact they are assessed as a parental asset (5.6%). While this treatment is more favorable than savings vehicles that are assessed as a student’s asset (20%), it is still an extra cost that should be considered.

Watch this video for more information about the impacts of a 529 plan on financial aid.

39 percent of respondents answered false to the statement “My child can never withdraw from the 529 plan without my permission”. One of the unique benefits of a 529 plan is that the owner, not the beneficiary, has legal rights to the account.

We believe preparing for the future costs of college is crucial to achieving financial independence. For many people, a tax-advantaged 529 plan offers the most effective way to build a substantial college fund. We will continue to explore areas of confusion surrounding 529 plans and offer our readers the most up-to-date solutions. If you have a specific question, our message board is a great way to connect directly with our Founder and 529 Guru, Joe Hurley.



What are your thoughts on making Personal Finance courses mandatory in American high schools? Do you feel that teaching young people about saving for retirement and college would be effective?



Don't miss the other posts in this series!

The purpose of the Annual College Savings Survey was to give us a better understanding of American families’ behavior and opinions toward saving for college. As we revealed in our last blog post, misconceptions regarding 529 college savings plans continue to run rampant, especially among those who are not currently investing in one. This led us to wonder if reluctance toward using 529 plans could be due to a lack of knowledge about their functionality.

New Responsibilities

As 401(k) plans continue to replace defined benefit pension plans, more workers are forced to make their own investment choices when saving for retirement. Similarly, as college costs continue to surpass record levels, parents are faced with new dilemmas on how to properly invest to save for their children’s tuition. How are Americans handling these new financial responsibilities? According to the Employee Benefit Research Institute’s 2014 Retirement Confidence Survey, workers’ confidence about being able to save for a comfortable retirement is at an all-time low. Furthermore, 36 percent of workers surveyed had less than $1,000 in retirement savings. Our College Savings Survey revealed that of the 70 percent of those who currently do not have a 529 plan have not even started saving for college.

How Can We Learn?

Experts agree that there is a strong need for education on financial products and services, and that the younger these topics are introduced, the better. The President’s Advisory Council on Financial Capability For Young Americans was formed to develop ways to educate teenagers and young adults on personal finance. One resource they provide is the Money As You Grow program, which identifies important financial lessons and activities tailored to children of various age groups. Parents can also find numerous articles, apps and software available that offer creative ways to instill financial values in children. We’ve even started a Pinterest board to collect ideas on teaching kids about saving.

Follow us on Pinterest to see all the great resources we've gathered!

Will Our Children Be Prepared?

Many people also feel that financial literacy programs should be mandated in public schools. According to the Council for Economic Education’s 2014 Survey of the States, only 17 states require high school students to pass a personal finance course in order to graduate. The rest are left to go on to college or the workforce with little warning regarding the consequences of not saving money or maxing out credit cards. While learning something is always better than learning nothing, some argue that the courses being offered are too broad and are not getting the message across.

What Our Survey Revealed

Our College Savings Survey brought to our attention that the biggest areas of confusion regarding 529 plans have to do with their effects on financial aid and ownership rights. 36 percent of those surveyed believed that savings in a 529 plan will not affect financial aid eligibility, when in fact they are assessed as a parental asset (5.6%). While this treatment is more favorable than savings vehicles that are assessed as a student’s asset (20%), it is still an extra cost that should be considered.

Watch this video for more information about the impacts of a 529 plan on financial aid.

39 percent of respondents answered false to the statement “My child can never withdraw from the 529 plan without my permission”. One of the unique benefits of a 529 plan is that the owner, not the beneficiary, has legal rights to the account.

We believe preparing for the future costs of college is crucial to achieving financial independence. For many people, a tax-advantaged 529 plan offers the most effective way to build a substantial college fund. We will continue to explore areas of confusion surrounding 529 plans and offer our readers the most up-to-date solutions. If you have a specific question, our message board is a great way to connect directly with our Founder and 529 Guru, Joe Hurley.



What are your thoughts on making Personal Finance courses mandatory in American high schools? Do you feel that teaching young people about saving for retirement and college would be effective?



Don't miss the other posts in this series!

 

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