If you have a college savings plan, perhaps even a 529 plan, for longer than two years, you know that the markets have casued quite a bit of damage to your plan. Since the fall of 2007, many of the selections available to you in a 529 plan are down more than 20%. If you invested your savings for college in a traditional equity fund, your losses may be 40% or even 50%. Unlike many other goals where there is flexibility in timing and costs, for college the timing is pretty set and the costs are not totally in your control, unless you consider a less expensive school.
Now what if I told you that you could have a rate of return of 30% or 40% over the next year? And you could be invested in the lowest-risk asset you can find, US Treasury bills. Would you believe me? It’s possible, through collaboration.
Collaboration, having others provide a helping hand in reaching your goal, can turn this disaster around much faster than you could do it on your own. Let’s walk through an example:
Jim and Marge have a 10 year old son and they have $5,000 in a 529 plan today, though it had been as high as $9,500. While they are unlikely to save enough to pay in full for school in 8 years, they want to be as prepared as possible. They decide they can save $500 per month in their 529 education plan. In 8 years, they would have contributed $48,000 more to their plan ($500 x 12 months x 8 years).
Alternatively, Jim and Marge set up a VestMatch plan and link their 529 savings plan to it. Using VestMatch, they invite Jim’s parents, Marge’s parents, and their siblings. Their parents each sign up to contribute $100 per month, and their siblings in total add another $100 per month. Jim and Marge still put in their $500 per month. Note that while Jim and Marge put in $500, just like in the first example, there is actually $800 going in each month — or 40% more than what Jim and Marge invest. This is the best return on those dollars they will ever find. In 8 years, they will have added $76,800 to their college savings.
This “rate of return” is available not just for people saving for college, but also for people who are saving for any financial goal — through collaboration. And VestMatch makes it easy.
Tags: 529 plan, collaboration, college, family giving, finance, investing, match savings, matched savings, saving
