Fewer than half of families are saving for their children’s higher education.
An overwhelming majority of families believe college is worth the investment, and that a college education is necessary in today’s workplace. But Sallie Mae’s newest annual “How America Saves for College” study finds that fewer than half of families are saving for their children’s higher education. Further, the amount they are saving is less than the previous year.
“How America Saves for College 2015” surveys the college-saving attitudes and behaviors of American parents with at least one child younger than age 18. This year’s report found that parents earmark roughly 10 percent of their total savings for college. The average amount put aside for college, however, fell to $10,040 in 2015, the lowest amount reported since the report’s inception.
“Despite their commitment to sending their children to college, parents are struggling to some degree with preparing to pay for future college costs,” the report states.
One-fourth of parents indicated they feel “overwhelmed, frustrated and worried” at the thought of saving for college. This is equal to the percentage who consider saving for college as “doing the right thing.”
Increases in the cost of living and unexpected expenses were the most commonly cited reasons for saving less money for college. Nearly half of college saving families are continuing to rely on general savings accounts while only 27 percent utilize tax advantaged accounts such as 529 college savings plans.
What strategies are families adopting to save for college? Among the most common cited in the Sallie Mae report include:
- Concentrating all of their college savings in a single savings instrument (69 percent)
- Automatically depositing funds into a college savings account (41 percent)
- Allocating a specific amount for college each pay period (31 percent)
- Using online tools and calculators to help estimate college costs or savings goals (26 percent)
- Reducing personal spending to contribute more to college savings (26 percent)
There is a clear correlation between planning for college and saving for college. Parents who build a plan to save and pay for college have saved, on average, one-and-a-half-times the amount saved by parents who do not have plans ($11,102 vs. $7,611), and they are three times more confident that they will be able to meet the cost of college, the report figures.
With the release of “How America Saves for College 2015,” Sallie Mae also introduced its new 1-2-3 approach to saving for college:
1. Open a savings account. Set up and designate a savings account as your college fund. Deposit gifts from friends and family, and sign up for free services that let you earn cash back to save for college.
2. Make regular contributions. Set a goal, and create a routine of adding money. Even a little bit adds up over time, and automatic deposits make saving easy.
3. Explore tax-advantaged options. Put your money to work using dedicated college savings programs like Coverdell Education Savings Accounts, prepaid state college savings plans, and 529 college savings plans.
Donald Liebenson writes news and features for Millionaire Corner. He has been published in the Chicago Tribune, The Chicago Sun-Times, The Los Angeles Times, Fiscal Times, Entertainment Weekly, Huffington Post, and other outlets. He has also served as a marketing writer for Chicago-based Questar Entertainment and distributor Baker & Taylor.
A graduate of the University of Southern California, he is married with a college-age son. He also writes extensively about entertainment.