Parents Are Saving for College

Fifty-seven percent of parents now put away money for their children’s secondary education, up from 48% in 2015, and their average balance has soared 152%—from $10,040 last year to $16,380—according to a survey by Sallie Mae and Ipsos Public Affairs.

As of last year, more than half, 55%, of parents feel confident they will be able to meet the cost of college, up from 42% in 2015. In addition, 88% of parents who have set a college savings goal are confident they will meet it, and 46% are saving for college using automatic deposit.

“The higher levels of optimism, confidence and savings evident in this research correspond with other economic trends we see, such as declines in unemployment and increased optimism about the economy among the U.S. public,” says Julia Clark, Ipsos senior vice president. “The findings from this year’s study highlight the different ways that different generations view and value a college education—and, critically, their differing approaches to financial planning when it comes to their children’s future.”

The survey found that Millennials are more committed to their child’s education than were other generations. Sixty-four percent are confident about meeting the cost of college, and 65% are saving—compared with 50% of Generation X and 61% of Baby Boomer parents. The average balance in Millennials’ college savings accounts is $20,155—compared with $12,428 for Gen Xers and $18,323 for Baby Boomers. Forty-four percent of Millennials are using 529 college savings accounts, compared with 36% of Gen Xers and 23% of Baby Boomers.

When it comes to who should be responsible for the saving—parents or the children themselves—38% of Millennials think it should be the parents, compared with 26% of Gen Xers and 18% of Boomers.

While 37% of parents among all age groups use 529 plans, up from 27% in 2015, the most common vehicle for that purpose is a general savings account, employed by 61% of parents, followed by a checking account (38%). The research shows, however, that the account balance for parents using a 529 plan is 25% greater.

Fifty-one percent of parents have a plan to pay for college, up from 42% in 2015, and those with a plan have an average balance of $18,389, compared with $10,468 for those without one. Seventy-one percent of parents believe that if a child knows money has been set aside for his higher education, he is more likely to attend college. In addition, 85% of parents are willing to make financial sacrifices to fund their child’s college costs.

Fidelity Investments also found a far greater percentage of American families now save for college: 72%, a 24% increase from 58% in 2007, when “Fidelity Investments’ College Savings Indicator Study” was first published.

To aid in saving, 41% of families are invested in a 529 college savings plan, a 62% increase from the 26% measured in 2007.

The median amount saved for college last year is still a modest $3,000, but this is double the figure from 2007. Among 529 plan owners, 45% have increased their contribution rate in the past 12 months.

“For many families, finding an extra $100 per month may seem out of reach, but these extra dollars could potentially boost college savings by even $40,000,” says Keith Bernhardt, vice president of college planning at Fidelity.