We talk a lot about the early bird catching the worm around here, and that's not just sales talk for "please use our product right now so that we can pay our developers enough that they can supplement their diet of instant ramen with the occasional Soylent shake".
We want to make it easier for you to save for college in the most effective way - and starting early really is key to this. That's not to say that if your child is already in high school that it's too late - every cent of college savings will be better off in a 529 plan than a regular investment or savings account. But if given the choice to start saving around the time of your gender reveal party, or only after little Molly has decided on her major, sooner is always better and we'll explain why...
A 529 college savings plan is a risk-adjusted investment account, which is just a fancy way of saying that your investment strategy automatically adjusts based on your child's age, so that you can get the most bang for your buck without being reckless. When your child is young, and further from college, your 529 savings plan invests a higher percentage of the account into equities. Don't let the phrases like 'higher risk' scare you, it just means certain investments have greater opportunities for earning. As your child gets older, the fund adjusts its investments and switches to more consistently performing bonds and cash accounts.
This investment strategy safeguards your funds, while ensuring you reach your maximum earnings in time for college, and it is designed to work best over the course of approximately 18 years.
A 529 college savings plan earns compounding returns. This is a phrase financial whizzes use to describe when the returns on your investment are reinvested along with the original investment - earning their own returns. This means the longer money is in your savings plan, the more time it has to make money. (We break it down for you in this
blog.) If you were to invest a total of $10,000 incrementally from the time your child was born, it would have more time to compound and would thus earn greater returns than if you invested the exact same $10,000 as a lump sum once your kid is already in high school.
The important takeaway here is that the earlier you start, the less you have to contribute to your plan to reach your savings goal.
We get it, just because you understand that you can maximize your earnings by starting early, doesn't mean that your average new parent has much extra money left over for investing in college tuition. You've probably just moved into a bigger place, and don't get us started on the price of diapers...
This is where Scholar Raise really shines. Scholar Raise makes it easy for you to contribute to your kid's 529 savings plan, and to share your 529 contribution link with friends and family. That way, they can contribute towards little Molly's college fund instead of paying inflated eBay prices for a
Hatchimal. Scholar Raise, unlike Hatchimals, always works, and gets better with time.
We're not going to sit here and preach about not buying toys at all - we don't want to be responsible for the broken-hearted 3 year old who didn't get to open any gifts this holiday season - but if we're totally honest, we all get a little carried away with the consumerism of gifting.
Instead of wiping out the fun, take a percentage of that spending and apply it to something they'll never outgrow -- a college education and a debt-free post graduate life.
We kid. We pay all our employees and contractors a livable wage. We're not monsters.
