National 529 Day is coming up in just a few days. The day is to celebrate college savings and raise awareness about the importance of saving!
A new survey by college savings leader CollegeBacker has found nearly half of families saving for college plan to pause, decrease or withdraw savings set aside in their kids’ college fund because of COVID-19-related financial woes.
WMAR-2 News spoke with CEO Jordan Lee to go over the effects of COVID-19 on saving for college and how early people should be starting to save.
Lee says it's never too early to start saving given the cost of college these days. While it may be difficult during these trying times for families who have become unemployed or have experienced a loss in hours, it's really important to start as early as you can.
"We actually have about 10 percent of our signups starting to save for a future child, so they're actually opening the foot prior to ever having the kids," Lee explained. "So even if it's a small amount that you're saving, that really goes a long way when it's invested in tax free and you're doing it every month, just over enough period of years that really adds up to a significant chunk of savings."
According to the survey the organization conducted, they learned that about half of the 1200 individuals who they surveyed have paused their contributions or pulled back a little. They dd find however that those with a 529 plan were three times more likely to continue to save.
"Once you've set it up, once you've got your recurring contributions, chances are you're gonna leave that alone," he explained. "Overall, you know, American families are definitely struggling a bit with this period of time, but the bright side is at a moment like this, you can actually lock in future gains because the market has declined a little bit. And if you are able to stay the course, you can make up for lost time and lost capital by trying to keep that habit going.
Even if you're unable to do this solely by yourself, Lee says CollegeBacker is really pushing the social aspect of their organization. Through the site, you can set a gifting page where your friends, family and others can help contribute to the child's future.
"[It's something for] some of your friends and relatives to consider if they were going to give your child a birthday gift," said Lee. "It might be more meaningful for them to contribute $50 or $100 into your kid's college fund, because that's going to grow tax-free over the next 10, 15, sometimes 20 years.
To get started saving for your child or even a future child's future, the process is very easy. Head to CollegeBacker.com, where they will help pick the right portfolio, investment option for you and you can get started completely for free! You can also be up and running with a collegefund through their app available on Google Play and IOS.