Middle- and lower-income parents can double their children’s chances of attending and graduating college simply by opening a savings account for them, according to a new review of 38 studies on the relationship between assets and children’s educational attainment by researchers at Washington University in St. Louis.
You may be thinking, well, duh: People who make a lot of money save up to send their kids to college, and those people probably went to college themselves. But the studies controlled for family income and the head of household’s education level — as well as for employment and marital status, number of children and academic achievement. After controlling for those factors, researchers found that children who have designated a portion of their own savings for school purposes are approximately two times more likely to be currently attending college or have already graduated.
Examining differences across income groups, a 2010 study found that among low-to-moderate income children, those who have savings earmarked for school are also about two times more likely to be currently enrolled in college or already graduated. (In the case of high-income children, the children’s savings is not statistically significant.)
But it’s a non-financial factor matters even more: Expectations.
When children expect to graduate from a four-year college, having basic savings is associated with children being approximately six times more likely to attend college. The research appears in a forthcoming issue of Journal of Children and Poverty.
Researchers are not certain whether savings predict college expectations or vice versa. One study found that savings has a slightly stronger relationship with children’s expectations than expectations has with savings, noting: “Savings first provide people with otherwise unattainable opportunities to hope, plan, and dream about the future for themselves and their children.”
Others suggest a two-way causation, or virtuous circle. But both attitude and action are important to the goal. As one study noted: “When children and their families save money for college, the meta-message asserts ‘we save’, ‘we go to college’, reinforcing the college-bound identity.”
With the cost of college up more than 70 percent after inflation over the last two decades, saving for education is no longer a luxury, but a necessity. Opening a 529 plan is a great way to start. Check out this post for more. Morningstar rates the best and worst of these plans (you have to register for the site but can access the report for free).