Some 55% of parents with children under the age of 18 feel confident that they’re ready to meet the future cost of college, according to a report from Sallie Mae and Ipsos [pdf]. Confidence tends to be higher among younger parents, who have different attitudes to their older counterparts about saving for college.
Indeed, Millennials parents (aged under 35) are the most willing to ask people outside of their family to help pay for college (64%), and they’re also the most likely to have started saving early (56% started when their child was 0-5 years old).
Perhaps as a result, 65% of Millennial parents feel confident in their ability to meet the future cost of college. Baby Boomer parents (48%) and those with children near college age show lower levels of confidence.
These trends – and several others – are discussed in MarketingCharts’ recent comprehensive study, Marketing Financial Services to Millennials.
Overall, the 55% feeling confident is a significant step up from 42% last year and 44% the year before. This could relate to the extent to which savings for college has also increased. This year 57% report saving money into a college fund, up from 48-51% doing so in the previous 3 years.
This makes saving for college second in the ranking of savings goals, slightly behind only emergency funds (58%), and ahead of retirement funds (56%) and general funds (53%).
Interestingly, the parents who are saving for college are much more likely to be using a general savings account (61%) than accounts designed for college savings, such as 529 plans (37%), Coverdell/Education IRAs (24%) and prepaid state plans (24%).
Still, when averaging out the share of respondents’ college savings, 23% are held in restricted college savings accounts (529 plans – 17%; Coverdell ESAs – 3%; and State prepaid tuition plans – 3%), about equal to the 22% held in savings accounts.
Lack of awareness may be limiting use of 529 plans: just 39% of parents reported awareness of these plans, although awareness was much higher among affluent ($100k+) families (65%). Among those not using 529 plans, the top reason given was that they don’t have enough money (22% share of respondents). Other important reasons were preference for another method (16%) and not knowing enough about them (16%).
That suggests that financial advisors could help families saving for college. (The role of financial advisors is a key area discussed in the MarketingCharts study.) In fact, parents are more likely to have turned to friends and family (37%) and online tools (27%) than they are to have used a financial advisor (26%) for information on how to save for college.
For much more detail on how families are saving for college – and their progress towards goals – download the study here [PDF].
About the Data: Sallie Mae produced “How America Saves for College 2016” with Ipsos, which conducted online interviews with 1,959 parents between May 26, 2016, and June 6, 2016. The survey sample reflected a cross-section of key demographic variables in the United States. Respondents were able to take the survey in English or Spanish.