Iowa Educational Savings Plans Trust

Benefits of Saving

The impacts of saving for education go beyond the tuition bill.

A little support goes a long way.

Don’t cut yourself short – by saving for a student in your life, you’re doing more than paying tuition and other education-related expenses. You’re fostering a dream!

A child with a dedicated education savings account of $1 to $499 is over three times more likely to enroll in college than a child with no savings account, and is more than four and a half times more likely to graduate. Little by little, you could be the difference between a dream and a reality.

Savings vs. borrowing: The numbers don’t lie.

Spoiler alert: While it may seem like a good idea to borrow everything your Beneficiary will need for higher education when the time comes, this is a mistake that could cost you hundreds, if not thousands, of dollars.1

Let’s take a look:

A family that saves $28,000 may earn $22,000, which brings their total investment to $50,000. A family that borrows $50,000 may have to pay $19,665 in interest, which brings the total investment to $69,665.

The family that borrowed spent over $40,000 more than the family that saved!

Make your money work for you.

No matter the age of your Beneficiary, saving now usually beats borrowing later. But if you find yourself thinking, “I have plenty of time, I can wait,” think again! With the power of compounding your investments, you could maximize your savings when you start now.

Chart explaining three different scenarios for saving. Family A: $5,000 initial contribution when child is a newborn + $100 monthly contributions + $26,812 in earnings = $53,412 total savings. Family A: $5,000 initial contribution when child is a newborn + $100 monthly contributions + $26,812 in earnings = $53,412 total savings. Family A: $5,000 initial contribution when child is a newborn + $100 monthly contributions + $26,812 in earnings = $53,412 total savings. Family B: $5,000 initial contribution when child is 6 + $100 monthly contributions + $11,895 in earnings = $31,295 total savings. Family C: $5,000 initial contribution when child is 12 + $100 monthly contributions + $15,823 in earnings = $15,823 total savings.

That is the beauty of compounding—earning money on your investment and then earning money on those earnings. And over time, it only grows more powerful.

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1The hypothetical borrowing example assumes a 7% interest rate with a 10-year repayment. The saving example assumes monthly contribution of $130 for 18 years and a 6% annual return. It doesn’t represent any particular investment, nor does it account for inflation or any taxes or fees payable/due upon distribution. Figures have been rounded.

2The hypothetical example doesn’t represent the performance of any particular investment. The assumed 6% rate of return is for illustrative purposes only. Actual market returns will fluctuate annually and aren't guaranteed. The ending balance doesn't take into account any taxes or penalties that may be due upon distribution.

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