Although parents overwhelmingly agree that a college education is an important investment for their kids, less than half are actually saving for their children’s education.
That’s according to Sallie Mae’s new “How America Saves for College” report, which also revealed that the parents who are setting money aside for their kids’ education are saving less than in past years.
Parents’ intentions are good. The report found that most parents earmark about 10 percent of their total savings for college. But the average amount of money socked away for college fell to $10,040 in 2015 from $13,408 in 2014. Of the parents who haven’t managed to sock any education funds away, 61 percent blamed a lack of money.
“Parents understand the importance of saving for college but putting theory into practice is easier said than done,” Michael Gross, vice president and head of the Higher Education practice at Ipsos Public Affairs, which provided the research for the report, said in a statement. “How America Saves for College 2015 shows that parents’ belief in the opportunities that college can provide, motivates them to adopt strategies and behaviors designed to help their children attend.”
About half of American families that are saving for college use a general savings account. Just 27 percent utilize a tax-advantaged account, like a 529 college savings plan.
Planning for college is instrumental in saving for college. Parents who have a plan to save and fund their children’s education typically save about one-and-a-half times more than parents who have failed to plan, the report said.
“Saving for college is of course about dollars and cents, and oftentimes the hardest part is getting started,” Charlie Rocha, executive vice president of Sallie Mae, said in a statement. “Setting reasonable goals can help parents foster their own commitment to saving for college, whether it be working to accumulate an actual dollar amount, setting aside a certain amount of money at a specified frequency or simply developing the habit of not dipping into college savings for other purposes. And those who do are far more successful.”
If you want to save for your kid’s college education, but you’re not sure where to start, check out “What’s the Best Way to Save for My Kid’s College?”
One way to build up an education fund is to open a 529 plans (which are tax-advantaged accounts), as my husband and I did for our children (ages 1 and 4) last year.
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