Jason and Melisa Berkowitz, of Scranton, understand the importance of saving money for college early. Although both attended college at The University of Scranton (with Melisa obtaining a bachelor’s degree from College Misericordia and a master’s degree from the University), neither had the advantage of a college savings plan growing up.
“At the time when I was going to school, it was mostly student loans, and I had a few small scholarships,” Melisa Berkowitz said, adding her parents paid some money out of pocket. “So that’s one of the reasons I’m starting to save now, because then it won’t be as much of a burden later when my kids are old enough.”
Their sons, Jason, 7 and Jacob, 2, both have a “529,” a tax-advantaged account which remains tax free when the holder withdraws funds for qualifying college tuition and expenses. The family is also a five-plus-year member of Upromise, a free program offered by Sallie Mae (an organization that assists families in saving, planing and paying for college) which adds to college savings by earning cash back from purchases made from hundreds of participating companies.
“I just think it’s a great program,” Berkowitz said of Upromise. “It’s free, and it’s extra money that’s there, and I don’t know why people wouldn’t just take advantage of it to get that for their kids.”
She pointed out every little bit of extra savings helps bring her and her husband closer to their goal for their children to be able to attend college without having to worry as much about the money.
Although most parents share this same goal or similar desires for their own children, a recent study by Sallie Mae, titled “How America Saves For College 2013,” reports that just half of families are saving for college, and only a third have a strategic plan to do so.
The report states in its overview that the data collected shows “American families overwhelmingly expect their children to attend college and that most parents are optimistic about their ability to save for it. It also shows that anticipated savings often don’t tie to the amount that families are currently saving, nor meet with the reality of the cost of college.”
The report explains parents who currently save only plan to save about 32 percent of the future cost of college, and are only meeting about half of that goal. Furthermore, a decline in savings continues since 2010.
“If the costs of college continue to rise,” the overview concluded, “or the availability of scholarships erodes, the absence of significant planning and saving for college costs could curtail opportunities for families to send their children to college.”
Families, however, need not give up hope.
Berkowitz said she believes it’s important to begin saving when your children are young, and to save as much as you are able. Even the small amounts will eventually add up to larger chunks as the child gets older.
She said it’s also important to conduct research and form a comprehensive and realistic plan for saving based on future tuition costs and expenses.
“We never know what our situation will be in the future, where we’ll be working, what type of job we’re going to have,” she said. “So right now while we can save, it’s the best time to start.”