One-third of Illinois Parents Not Saving For Kid's College?
Here's Why, and Tips to Start
SPRINGFIELD, Ill., JUNE 2012 - Illinois kids hoping to attend college might start honing their pizza-delivery skills now. They're going to need all the tips they can earn.
Because while 97 percent of Illinois parents hope their children get a college education, one-third of those households are not saving for education expenses. Why not?
A survey by Bright Start College Savings reveals that these parents view a lack of available funds and a lack of knowledge regarding savings choices as their biggest barriers. Financial advisors, though, say parents can overcome these barriers and provide important contributions to their kids' futures more easily than they may think.
Eighty (80) percent of Illinois families who aren't yet saving say they simply don't have the money to put aside for future education expenses. A smaller number (14%) are worried they won't be able to save enough for it to make a difference down the line.
College savings expert Andrea Feirstein, managing director of New York-based AKF Consulting Group, urges parents to set aside these reservations and start planning to save today. "Time is your biggest asset when saving for the long-term," she says. "Even small initial amounts will add up and can grow as your child grows."
"With many financial planners warning against burdensome student loans - that can take years to pay off and lessen the return on a college diploma - finding alternative ways to pay for college becomes crucial for parents and prospective students", says Bridget Byron, Director of College Savings Programs at the State of Illinois Treasurer's Office
Feirstein offers five tips on how to "find" money to save:
1. Start with small changes. Bring your lunch to work and save as much as $50 a week, depending on your habits. Scale back on or eliminate luxuries like magazine subscriptions, monthly manicures and premium cable channels.
2. Open a tax-advantaged 529 college savings plan and ask family and friends to contribute to your child's account in lieu of birthday and holiday gifts.
3. Create a family matching plan in which your child puts part of their allowance, earnings or gifts into a savings account and you match dollar-for-dollar (or more). This will also help your child with their own good savings habits for the future.
4. Set up a direct deposit to have a small portion of your paycheck to go directly into a college savings account.
5. Take account of all your spending. Make a spreadsheet that buckets every single dollar you spend. Review it every month to see where you can divert money into a savings account.
For other Illinois families, it isn't a lack of funds preventing them from saving for college, but rather a lack of knowledge. According to the Bright Start College Savings survey, ten (10) percent of non-savers say they are unsure which investment vehicles to use. Another 7 percent believe that college savings accounts will reduce their family's eligibility for financial aid.
For these parents, Feirstein advises doing some research or consulting an advisor. "There are many ways to save for college, with state-sponsored 529 plans among the best," she says. "They not only offer tax advantages, but also do not significantly impact financial aid eligibility."
About Bright Start College Savings:
Bright Start College Savings is a Section 529 education savings program created and administered by the state of Illinois. It allows account holders to save for the cost of education in a Bright Start College Savings account without paying taxes on earnings.