Plan Your Future
Tips to grow your college savings
This series will demonstrate how a personalized financial strategy and access to J.P. Morgan investment expertise via Chase Private Client can assist you in planning for your financial needs today and the life you want tomorrow.
When you become a parent, you know that you have to plan for college. The cost of education in the United States, especially private education, is high—rising yearly and outpacing the rate of inflation.1 The total cost for one child from nursery school through graduate school can run as high as $1,000,000, according to a paper by J.P. Morgan.
Education is changing, and with the new emphasis on science, technology, engineering and math (or STEM), kids will need to go beyond traditional classroom education. For instance, studying abroad and skills-based, technical education are becoming more common.
With the tools and resources that are most appropriate for you, saving for college can be within reach. So here are a few things to consider when planning for the costs of a college education:
Prioritize and adjust your portfolio to your long-term goals
Even if you have the best intentions when it comes to savings, priorities are going to collide. A financial advisor can help you clarify what to focus on now versus later. They can also help you adjust your plan for when you need to switch gears. The holdings you choose should reflect your long-term goals, investment profile and acceptable risk.
Start early and tap into your network
There are many tools to help you save for education, from traditional savings accounts to 529 plans, and it's becoming more common to ask friends and relatives to contribute to them—often in lieu of toys for gifts—especially for infants. Small contributions like these can add up in the long run.
Understand all the tools available
When people think about college savings, they often think of 529 plans. They are a flexible, tax-efficient college savings vehicle, and in some states, also allow for a state-tax deduction when making contributions.2 But there are other options, too, such as Coverdell Education Savings Accounts and custodial accounts for minor children under the Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA) that can also be helpful.
Different approaches have advantages and drawbacks. Most families use a combination depending on their circumstances and goals. A financial advisor can help find the best options for you.
Learn about the benefits of compounding
The sooner you start saving, the more time you will have to grow your college savings through the power of compounding interest. The savings will add up - exemplified in a recent study by J.P. Morgan Asset Management titled College Planning Essentials. It detailed if you start saving $500 per month when a child is born, you will save nearly $85,000 more then if you start saving at the same amount when that child is six. Investing early is important and the savings will add up.
Whether you invest on your own or with a financial advisor, having a plan and the right tools and resources will get you on your way to saving for college.
Depending upon the laws of the home state of the customer or designated beneficiary, favorable state tax treatment or other benefits offered by such home state for investing in 529 Plans may be available only if the customer invests in the home state's 529 Plan Any state-based benefit offered with respect to a particular 529 Plan should be one of many appropriately weighted factors to be considered in making an investment decision; and The customer should be advised to consult with their financial, tax or other adviser to learn more about how state-based benefits (including any limitations) would apply to their specific circumstances.
Investing involves market risk, including possible loss of principal, and there is no guarantee that investment objectives will be achieved.
JPMorgan Chase Bank, N.A. and its affiliates (collectively “JPMCB") offer investment products, which may include bank managed accounts and custody, as part of its trust and fiduciary services. Other investment products and services, such as brokerage and advisory accounts, are offered through J.P. Morgan Securities LLC (JPMS), a member of FINRA and SIPC. Annuities are made available through Chase Insurance Agency, Inc. (CIA), a licensed insurance agency, doing business as Chase Insurance Agency Services, Inc. in Florida. JPMCB, JPMS and CIA are affiliated companies under the common control of JPMorgan Chase & Co. Products not available in all states.
2. Depending upon the laws of the home state of the customer or designated beneficiary, favorable state tax treatment or other benefits offered by such home state for investing in 529 Plans may be available only if the customer invests in the home state‘s 529 Plan. Any state-based benefit offered with respect to a particular 529 Plan should be one of many appropriately weighted factors to be considered in making an investment decision; and the customer should be advised to consult with their financial, tax or other adviser to learn more about how state-based benefits (including any limitations) would apply to their specific circumstances.
Pauline Millard is a Chase News contributor.