Free cash for college funds-- a new program aimed at jumpstarting college savings for millions of children launched in California on Wednesday.
The State of California is creating college saving accounts for all newborns as well as low-income school children.
“This is telling every student in California, every low-income student that we think they’re college material and that they should start planning early,” said Ben Chida, Chief Deputy Cabinet Secretary for Governor Gavin Newsom.
Under the CalKIDS program, all babies born after July 1 now have access to college savings accounts with up to $100.
Low-income public-school students are eligible for $500. The state adds another $500 if they are in foster care or experiencing homelessness-- up to $1,500 in total.
“Part of the seed investment from the state-- which is between 500 dollars and 1,500 dollars-- is really to encourage and motivate families to add a couple of dollars here and there when they are able to over the decades that their kids are growing,” said Chida.
Parents will need to register online with CalKIDS to gain access to the account. Families are not required to contribute though they can add to the savings.
Saving early is taking on added importance as inflation continues to push prices up.
“When our kids get to the college age, the cost is going to be much higher than when we went to school ourselves,” said James Simonaro, a financial advisor at Wealth Enhancement Group. “Starting early and saving young can help so you can amass a large amount of money to help them get through school.”
Simonaro adds that if you receive $100 and leave it alone-- it will turn into about $240 by the time your kid turns 18.
That money, however, could go much further if you regularly add to the savings account.
“Let’s say now we start adding to it maybe monthly, let’s say 100 dollars each month with the same five percent annual return… that turns into about $35,000 by the time they’re 18.”
The funds in the 529 account will be available once a student turns 18.
Through an online portal-- you’ll be able to select which university, college, or vocational school you want to send the funds to.
“What students will be able to spend it on is essentially anything that is going to cost money in order for them to go to college or career training,” said Chida.
The governor’s office says that 3.4 million low-income Californians are eligible for at least $500.