This is a guest post from CollegeBacker. At Savingforcollege.com, our goal is to help you make smart decisions about saving and paying for education. Some of the products featured in this article are from our partners, but this doesn’t influence our evaluations. Our opinions are our own.
Let’s face it, goals are incredibly important and can be highly motivating, but they lose their value as soon as they start to feel out of reach. When the goal is for something as important as saving for a loved one’s future education, it is critical that we do everything in our power to keep them within reach.
One of the easiest ways to make significant progress on a savings goal like this is to enlist the support of family and friends.
It may surprise you to learn that many millennials are already doing this for their student loans. According to a recent survey, almost 30% of millennials are receiving some financial support from family or friends to help them pay off their student debt. Given that there’s about $1.7 trillion of student debt outstanding, it is encouraging to see that borrowers are willing to lean on their parents and peers for support after overcoming so many challenges, from the Great Recession of 2008 to the current economic crisis caused by Covid-19.
Unfortunately, the picture is not as rosy when it comes to college savings. Nationwide, only about 1% of contributions to 529 college savings plans are from gifters, and only 1-2% of 529 plan owners have received any gifts at all. If you compare this to the rate gifting for student loan payments, there is clearly a huge untapped opportunity to involve family and friends more deeply in the college savings process.
CollegeBacker, a web and mobile-based college savings platform, was created to solve this problem. It makes saving for college a collaborative process in which the family and everyone else who cares about the child can each play an important role. Since its founding in 2015, CollegeBacker has helped participating families avoid over $35 million in student loan debt. And gifts from family and friends are a huge part of that, with over 30% of the money it has helped families save coming in the form of gifts from family and friends.
Based on CollegeBacker’s Savings Calculator, if your child is 5 years old and you are able to contribute $25 per month, then you’ll end up with $6,820 when it’s time for college. But if just one family member is also able to contribute $10 per month, then your savings will increase to $9,550. That’s 138% more than you would have saved alone with a savings account!
In CollegeBacker lingo, these gifters are called “backers,” and the key to making college savings collaborative is to make the gift giving experience as seamless as possible. Each child gets a beautiful gifting page – CollegeBacker.com/name – and backers are able to contribute using a debit or credit card, rather than share their sensitive banking information. You can share the link via email, text, or social media.
How Does CollegeBacker Gifting Work?
Gifters can contribute as little as $5 and there is also no charge or fee for making a contribution – as every dollar makes a difference.
Once the gift is given, CollegeBacker then makes it easy for these backers to stay involved, either by setting up a recurring contribution or by following along as the child progresses toward college.
A robust gifting experience like this can make a huge difference for any family. These CollegeBacker stats tell the story:
CollegeBacker allows you to open a new 529 plan or connect to an existing plan. You can set a goal and automate contributions so you never forget. Plus, you can earn cashback rewards towards your college savings by shopping through their partner links.
This holiday season, don’t leave college savings gifts on the table. Let the grandparents or anyone else who’s in the giving mood make their love felt with the most meaningful gift of all: the gift of education. And don’t forget, even small gifts can add up to a lot years later if they’re invested tax-free with a 529 Savings Plan.
Interested in starting a collaborative college fund with CollegeBacker, or connecting your existing 529 plan so you can take advantage of Backer Gifting and other modern features? It only takes 5 minutes to set up an account and then you can start reaching out to everyone who cares about your child’s future.