Data & Research January 30, 2014

College Savers See School Costs as Priority

A strong majority of working parents already saving for their kids’ college expenses rank future education costs among the top reasons to save in 2014.
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While slightly more than one-third (34%) of those already saving some money for college expenses identify such savings as their most important financial effort, nearly nine in 10 (85%) rank college savings in the top three reasons to save, new research from Fidelity Investments shows.

A similar proportion (88%) of current college savers say they intend to divert as much or more of 2014 income as they did last year to future school expenses, with 60% saying they intend to save more. Fidelity also finds that most parents have plans to save a fixed monthly amount during 2014, at an average of $405 per month.

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One upshot for financial advisers and human resource professionals alike is the growing popularity of education expense-related benefits, such as qualified 529 college savings plans, through which earnings can be used free of federal income tax for qualified higher education expenses like tuition, room and board, and books.

Fidelity finds that only about half of parents who report actively saving for college expenses utilize a 529 product. But among the half that does, nearly all (93%) intend to contribute at least as much as they did in 2013.

Most parents (81%) say they intend to save a portion of monthly income. Other popular strategies used by active college savers include diverting part or all of 2013 tax refund monies (37%), earmarking a portion of a bonus or raise (36%), and reallocating funds previously allotted to day care or after school expenses (24%).

Another interesting result from the Fidelity survey is that parents aren’t working alone in saving for their kids’ education costs. Nearly four in 10 families (37%) say they will save a portion of monetary gifts their children may receive throughout the year for birthdays and other holidays. Half of parents surveyed say that family and friends have already contributed to their child’s college savings fund. Grandparents, in particular, are playing an important role, with 41% contributing.

Fidelity also asked parents to share their “to-do” lists for college savings in the 2014. The most common goals for 2014 are ranked as follows:

  • Talk to children about how much college costs and how their family will pay for it (58%);
  • Research scholarships and grants to help offset costs (53%);
  • Consider talking to a financial planning expert for help (48%);
  • Learn more about how the financial aid process works (39%); and
  • Ask their children to save some of their own earnings (30%).

Fidelity says it has a host of resources that can help working parents to set and stick to a college savings plan. The firm offers a free 2014 College Savings Tips Calendar, providing a monthly outline of suggested strategies to help make college planning a year-long commitment.

Fidelity’s College Savings Resource Center offers online planning tools and calculators to help families engaged in the college savings process, and also includes a broad overview of savings options and strategies, and guides to search and apply for financial aid and scholarships.

Diversions January 30, 2014

Turns Out, Looks Do Matter

How you look most affects your life prospects, and looks can most definitely spell success, according to a report by the Council on Contemporary Families.
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The council’s report, “In School, Good Looks Help and Good Looks Hurt (But They Mostly Help),” suggests that looks can be a reason for inequality—and that good looks are a lifelong advantage on a par with inequalities connected to race, class and gender. The report was written by two sociologists, Rachel Gordon, from the University of Illinois at Chicago, and Robert Crosnoe, from the University of Texas at Austin.

Personal appearance can have measurable financial consequences. For above-average looks, women gain an 8% wage bonus. They pay a 4% wage penalty for below-average looks. For men, the bonus is just 4%, but the penalty for below-average looks is even higher than it is for women: a full 13%.

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Most people acknowledge that racial and gender discrimination still exists. In one study, for example, job applicants with White-sounding names got called back twice as often as those with Black-sounding names. Another study documented hiring bias in favor of men. Applicants applying as men were offered salaries 12% higher than applicants with identical qualifications who applied under women’s names.

From high school on, people rate better-looking people higher in intelligence, personality and potential for success. Gordon and Crosnoe found that young people rated as better looking receive higher grades and are more likely to attain a college degree than their peers, setting the stage for better economic outcomes through adulthood. In fact, the difference in GPA and college graduation rates between youth rated by others as attractive versus average in looks is similar to the differences in academic achievement between youth raised in two-parent versus single-parent families.

The study’s authors acknowledge some disadvantages to the popularity that comes with being seen as attractive. “Youth rated as more physically attractive are more likely to date, have sexual partners and drink heavily,” they note. These factors, in turn, have negative consequences for immediate grades and later college completion.”

 Research suggests a cumulative advantage to being considered attractive that continues long after high school cliques have dissolved. They find that even when people are listening to a speaker on a phone call, they tend to “hear” more warmth and sociability from individuals they have been primed to think are attractive than from individuals who have been portrayed as unattractive.

On balance, the report maintains, above-average looks provide people with long-term advantages while being unattractive is a source of disadvantage. Gordon and Crosnoe suggest in their report that parents and schools pay more attention to countering the effects of lookism.

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