How my 529 plan is helping me raise a curious, motivated daughter
By Hon. Michael Frerichs, Illinois State Treasurer & Vice-Chair of the College Savings Plans Network
December 5, 2019
Gone are the days when you could expect to finish high school and get a well-paying job to support a family. These days, access to a good career with good wages generally requires some education post-high school; a degree from a two- or four-year college or a trade or vocational school. This is why many parents make it a priority to discuss college or trades schools with their kids.
However, most parents may not think to discuss college savings with their children. I know my parents didn’t.
College and change
Growing up, my family lived in a rural town of about 800 people. My parents didn’t attend college, and their parents didn’t attend high school. At that time, college wasn’t something for which our family saved money. In fact, I was raised to think that you’re never supposed to talk about how much money you have — let alone how much higher education costs or how much money your parents may have saved.
It wasn’t until I was accepted to college that my family and I discussed college costs and savings. At 17 years old, I remember coming home with an acceptance letter to Yale. When I told my parents, my father’s response was, “Good for you … but you’re not going. We can’t afford it.”
Like most teenage boys, I was headstrong and wouldn’t take no for an answer. I continued to push, and, after much conversation, my dad agreed to let me go to Yale. But I had to do get there on my own.
Now my dad is one of my biggest supporters, and we’re both grateful I pursued higher education.
Having grown up in a family that didn’t discuss college cost or savings, I was determined, when I had a child of my own, to save for her college and make sure she knew it.
Saving is believing
When my daughter Ella was born, one of the first things we did was research our college savings options. We opened a 529 plan and set up regular contributions. We watched the savings grow as Ella started taking her first steps, went to her first day of preschool, and started to dream about what she wanted to be when she grew up.
When Ella was 5, I started talking to her about her college savings account. According to research from the Center for Social Development, a child is three times more likely to go on to higher education if they know they have a college savings account. If you tell your child that you set up a college savings plan for them, it’s not just telling them you have money set aside. It’s a statement of belief. You’re telling them, “I believe that you’re smart, that you’re college material, and I’m investing in you.” When they hear and internalize that, I think they work harder.
As Ella grew up, she kept asking more questions about her college savings. A few years ago, I decided to start showing her the quarterly statements I received from Bright Start. I use our discussions as an opportunity to explain investing to her – including how much money we’ve deposited in the account and how investing has led to that amount growing over time.
Discussing the future
Although we discuss her college savings, Ella’s not going to start investing her own money tomorrow. But our discussions do encourage her to ask questions about college and the investments we’ve made to ensure she pursues higher education. I remember one conversation in particular:
She asked me, “Daddy, is that all my money?”
I jokingly told her, “It is, Ella. As long as you go to college. If you don’t, daddy is going to take that and use it in his retirement.”
She looked at me worried, “No, no, no. I’m going to college.”
Now in fifth grade, Ella hasn’t quite figured out the details of what she wants to be when she grows up. Maybe a dentist or a chef. Maybe a veterinarian or an artist. She’s got time to figure it out. But as she learns more about different career choices, we talk about what it will take to achieve each of those careers and how saving for college will help her get there.
Our 529 plan has helped us raise a curious daughter who is always trying new things and looking at new possibilities. When I discuss college and college savings with Ella, I think about my father, and how proud he is of his granddaughter and that she wants to pursue her dreams.
It’s amazing what a child can accomplish when you give them a goal to work towards. Opening a 529 account, investing in your child’s future, and openly discussing it as a family can show a child the importance of college and the investments being made today to ensure they’re college-bound tomorrow.
About the Author
Michael Frerichs is the Illinois State Treasurer, who operates as the state’s Chief Investment and Banking Officer. Frerichs believes in providing individuals with financial tools so that they can invest in themselves. He does this by encouraging savings plans for college and trade school, increasing financial education among all ages, removing barriers to a secure retirement, and reuniting Illinois residents with their unclaimed property. Frerich administers Illinois’ two 529 plans, Bright Start Illinois 529 College Savings and Bright Directions Advisor-Guided 529 College Savings. He currently serves on the Executive Committee of the National Association of State Treasurers, the National Association of State Auditors, Comptrollers, and Treasurers, the College Savings Plans Network, and the National Association of Unclaimed Property Administrators.