This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
$1 buys you full access to ALL of TheStreet's Subscription Services! Learn More

Open 2 Savings Accounts, 1 Just for College Money

NEW YORK ( TheStreet) -- Call it a tale of two saving accounts.

A study of the college savings patterns of Illinois parents says 58% only have one savings account, or none at all.

The study, by Bright Start College Savings, a Springfield, Ill.-based college savings program sponsored by the state of Illinois, says parents would do well to have multiple savings accounts -- one earmarked for college savings and another for entertainment or living expenses.

The idea is that two active savings accounts will drive consumers to save more -- not less -- and that bank savers who have only one account (or worse, none) actually save less money.

How so?

Bright Start offers up a scenario where having just one savings account makes it hard to resist raiding that account for things such as football tickets or a family vacation. By keeping a college saving account separate, the group says, parents can better manage short-term and long-term financial goals.

"Certainly, many parents with children aren't in a position to save a lot of money for expenses far in the future," explains college savings industry consultant Andrea Feirstein, a managing director at New York-based AKF Consulting Group. "But they should make an effort to save whatever they can, and to split their savings into different buckets."

There is one major rule with the "two savings account" plan: One of those accounts has to be for college planning, at least for the 97% of parents who want to send their children to college, Bright Start says. The benefits are ample, the group reports, with tax savings and a big head start on paying for college at the top of the list. Savings fund that are clearly targeted to collegiate savings stand a better chance of being left alone, and not be raided by cash-needy parents.

Parents can't afford to skip opening a college savings account, BrightStart officials report.

"With many financial planners warning against burdensome student loans -- that can take years to pay off and lessen the return on a college diploma -- finding alternative ways to pay for college becomes crucial for parents and prospective students," says Bridget Byron, director of college savings programs at the State of Illinois Treasurer's Office.

Bright Start says that even "small changes" can lead to big savings. For example, bringing your lunch to work can mean an extra $50 in a savings account. Instead of teddy bears and video games for the kids' birthdays, ask family and friends to make a cash donation to their college savings.

Creative parents can launch a "matching" program in which they match, dollar to dollar, any money put into a child's savings account by a family member, friend or even the child.

There is one downside to the savings angle, whether you open one or more accounts. According to BankingMyWay.com, bank savings rates remain in the gutter, offering a paltry 0.081% in interest this week.

So don't expect to earn much interest on your savings accounts.

Past that sour note, the idea is an intriguing one.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,810.06 +91.06 0.51%
S&P 500 2,063.50 +10.75 0.52%
NASDAQ 4,712.97 +11.1030 0.24%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs