The Importance of Early Savings and Long-Term Commitment in Shaping Financial Outcomes

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This week’s insight underscores the importance of saving early and often, while also highlighting the crucial role our commitment and behaviors play in shaping our financial outcomes.

Twelve years ago, 600 low-income public-school students were each given a bank account with a $50 deposit to offer less fortunate families a leg up with their finances. Since its launch in 2011, this initiative, known as “The Kindergarten to College Program” in San Francisco, has expanded to 39 other states. It boasts 52,000 active accounts with a combined value of $15 million, representing the total sum of all participant balances. While an entitlement by any measure, the program also helps to expand financial literacy to those most vulnerable to falling behind when it comes to saving for education. The hope was that nudging parents forward with a $50 account would lead to ongoing contributions as the child grew up.

Research indeed suggests that even small college savings increase the likelihood that a student will one day attend college and complete their degree program. But here’s the problem: Parents struggling just to get by often fail to add to the accounts, and thereby miss out on market gains and the wonders of compounding through periodic investments. Consequently, the original class of students now has an average account balance of just $1,422 per teenager today. What’s the solution? We’ll leave that to the researchers and see what more public initiatives might come about.

Chances are you have the means to both help your kids pay for the steep costs of attending a 4-year university and saving for your own retirement. There’s a good chance, too, that you once struggled to get by financially. We can all learn from the Kindergarten to College campaign—it’s not so much just laying the foundation that matters but committing yourself to the goal over time.

Try this: Along with setting goals and leveraging the benefits of automated savings and investing, be sure to visualize your goal. That makes your mission more meaningful and salient in your brain, emboldening you to keep up your progress. Also call on an accountability partner who can act as an external motivator. Finally, reward yourself! When you reach a goal, such as maxing out your 401(k) or IRA contribution for a year, go out for a night on the town with your spouse.

Remember, making financial progress requires consistent effort and dedication. Whether you’re saving for college or building a business, ongoing commitment is essential to your financial success.