Tricia Scarlata of JPMorgan Asset Management said parents should begin saving for a child's college education at birth.
Starting savings early allows families to leverage compound growth over nearly two decades. This strategy helps mitigate the rising costs of higher education and reduces the reliance on student loans later in life.
Scarlata, who serves as the Head of Education Savings at JPMorgan Asset Management, said these strategies during a Bloomberg interview on Friday. The timing coincided with 529 Day, which is observed on May 29 [1].
She said 529 plans are a primary tool for these savings. These tax-advantaged accounts are designed specifically to encourage saving for future education costs. By contributing at birth, parents maximize the window for investment returns to accumulate, a critical factor in building a substantial fund.
Scarlata said that missing the early years of a child's life can result in lost opportunities for funding. The compound interest generated from small, consistent contributions made during infancy can significantly outweigh larger contributions made when a child is older.
The discussion on 529 Day aims to raise broader awareness about the importance of structured education savings. Scarlata said that planning for these expenses early provides a more stable financial path for both the parents and the students.
“Parents should begin saving for a child's college education at birth.”
The emphasis on birth-date contributions reflects a broader financial strategy to combat the inflation of tuition costs. By utilizing 529 plans immediately, investors shift the burden of funding from active income in the future to passive growth in the present, effectively lowering the total out-of-pocket cost required to fund a degree.
