Nearly six in 10 parents are saving for college, and one-third increased their savings this year, according to a new report, “How America Saves for College,” released by Sallie Mae and Ipsos.
After saving for general needs, emergencies and retirement, parents focus on retirement savings. Only 10% plan to tap their retirement savings to help fund their child’s college education. Sixty-one percent contribute a set amount on a regular basis. To help fund college savings, 30% have cut back on discretionary spending, and 27% have reduced their household expenses. Their average balance is $18,135, the highest amount in the past five years.
Among all types of college savings vehicles, 529 plans hold the highest percentage of assets, at 30%. However, only 29% of parents saving for college use 529 plans. Among those not using 529s, they either say they did not know about them or not enough about them, or that they do not have enough money to invest in a 529 plan.
Eighty-six percent of parents who have a college savings goal are confident they will achieve it. The average goal is $55,342. On average, parents started saving for college when their child was seven. Parents who have a plan for how they will pay for college have an average of $22,169 saved, compared to $9,208 for those without a plan. Seventy-three percent of the former are also confident they will be able to meet the cost of college, compared to 27% of those without a plan.
“This year’s report findings reflect America’s rising consumer confidence levels overall,” says Julia Clark, senior vice president at Ipsos. “The data show that parents are making smarter, and most optimistic, decisions about their plans for education for their children.”