Experts say they do! A study completed by the University of Kansas found that students from moderate and low income families who had saved up even less than $500, were three times more likely than their peers to enroll in college. Furthermore, these students were four times more likely to graduate from college. Perhaps not surprisingly, those with higher balances in savings accounts were even more likely to enroll in and graduate from college. Five hundred dollars is a drop in the bucket compared to the total cost of four or five years of higher education, so why the dramatic difference?
The largest reason behind this difference comes from the college bound mind-set that is formed when children take an active role in saving for college. It elevates children’s expectations of themselves, their education and their future. The study also found that by using a youth account, kids learn habits they take to college. Saving, budgeting and paying bills are all skills students need when handling finances on their own in college. Learning these skills beforehand can take away a lot of the stress of being a new college student.
In addition to their personal finances, students may also struggle with how to pay for tuition, books and living expenses. Many students end up taking out at least some student loans and many students, and their parents, can be wary of this process. They are aware of national trends indicating that the total amount of student loan debt is rising fast and may have heard stories of people struggling to pay off large loans. From 2007 to 2012, just a five year period, the amount of student loan debt in the United States tripled. This is just one more reason why today’s students need to be better equipped with financial knowledge and practice than ever before.
As you teach your kids about money, review A Parent’s Guide to Raising Money-Smart Kids for a comprehensive guide with tips, resources and examples.
Source: Assets and Education Initiative. (2013). "Building Expectations, Delivering Results: Asset-Based Financial Aid and the Future of Higher Education." In W. Elliott (Ed.), Biannual report on the assets and education field. Lawrence, KS: Assets and Education Initiative (AEDI).