Conservative is King
At College Savings Bank, we are in the business of providing conservative college savings products -and business is good.
In December, 2007, Jane Kim of the Wallstreet Journal wrote, “529 plans are expanding their investment choices beyond offering just mutual funds, to include more conservative options to lure parents and grandparents unwilling to play the stock market with their youngsters' college funds.”
When it comes to saving money for college, parents tend to save conservatively. College Savings Bank allows you to do this by investing your money wisely and efficiently. Over the past 20 years, 25,000 families have saved for higher education using College Savings Bank. The Bank held $240 million in deposits as of December 31, 2007.
Some college investments can lose value and leave your child’s education under funded because they can swing widely with the stock market or are not insured by the FDIC. However, with College Savings Bank, your child’s funds will be protected and principal is FDIC insured.
According to a study done by Alliance Bernstein Investments, many parents have children that are reaching college age and are becoming more risk adverse with their funds. Parents believe that when saving for college, it’s best to use only low-risk investments because that money has to be there when the time comes for college. They have the date of the first tuition bill planned in their minds and are worried about being ready when that time comes. This may explain why 31% of parents with specific accounts dedicated to saving for college say they prefer to take little or no risk with savings.
Even under ideal circumstances in the market, parents should still save conservatively for their child’s higher education. At College Savings Bank, we respect the hard earned money made by our families and we know the importance of keeping that money safe and protected. Because a college investment has a finite withdrawal date, an investor facing a loss from equity-based returns, may not have time to recuperate.
By investing conservatively, a parent will always know the amount of funds available when it is time to use the money.
Investing in a savings plan for your child can help you and your child financially; however, the true return of these investments is measured in education and the advantages that a college education can bring your child. Risking those advantages to chase an equity based return is not worth the potential loss in many parents’ eyes.
“We believe parents tend to feel more comfortable with a conservative method of saving, where no risk is involved,” said Linda Green, AVP and College Savings Adviser at College Savings Bank. “Our families realize that the true return on this investment is not measured in wealth, but instead by a diploma. And that is what many are not willing to risk.”
According to a U.S. Census Bureau study in 1992, the average yearly income of a college graduate was upwards of $24,000 in comparison with a high school graduate. Over the time of a 40-year career, the difference in earnings between a high school graduate and a college graduate can be as much as $1 million (in 2006 dollars*) and even more if an advanced degree is acquired. In addition, by 2007 over 1 in 4 adults, ages 25 and older completed at least a Bachelor’s degree. This number continues to grow. As more and more people complete higher education, careers will become more competitive.
*1992 values adjusted for inflation.
“A college education is becoming more important today based upon increasing competition in the workforce and more and more people acquiring a college degree.”
At College Savings Bank, there are two ways to conservatively save for your child’s education and protect the funds that you put into it. The CollegeSure CD has been used over the past 20 years by families saving for college and is only available through College Savings Bank. It is the only CD designed to meet the future cost of college. Principal and interest are FDIC-insured -- backed by the full faith and credit of the U.S. government -- to at least $100,000 per depositor. The CollegeSure CD has also been awarded Standard & Poor's highest credit rating.
In addition to the CollegeSure CD, College Savings Bank now offers the InvestorSure CD. The InvestorSure CD is indexed to the performance of the S&P 500 and gives you the ability to invest in the equity market without the risk that other stock investments may have. Both the CollegeSure CD and the InvestorSure CD are offered without fees and unlike other investments, the InvestorSure CD from College Savings Bank will offer a principal guarantee if held to maturity, so should the market decline, or the S&P 500 lose value, deposits will not suffer principal loss. With these two products offered by College Savings Bank, you can save for the higher education of your child wisely and efficiently.
It is important for parents to save conservatively for the higher education of their child. To learn more about these products and College Savings Bank, log onto our website, www.collegesavings.com or call a College Savings Bank Adviser at 1-800-888-2723.