As the cost of higher education skyrockets, it seems like families would be researching the best ways to pay for college.
Instead, new research reveals Americans actually are less aware of certain options when it comes to saving for school.
According to a survey by financial services firm Edward Jones, only 30% of Americans were able to accurately identify a 529 college plan as a savings tool from among four options. That’s a significant decrease from 2012, when 37% chose the correct option.
In the Northeast, 39% of people knew about 529 plans, down from 45% in 2013; and in the Midwest, just 30% of people were familiar with the savings tool’s benefits, down from 36% in 2013.
“It seems counterintuitive that the costs of higher education continue to rise while awareness for a vehicle than can make this cost more manageable continues to decline,” Greg Dosmann, principal with Edward Jones, told MainStreet.
In fact, the average cost of a private four-year college (including tuition, fees and room and board) increased a whopping 14% between 2008 and 2013, to $40,917.
So why aren’t more Americans learning how to prepare themselves for this financial burden? The problem may be that Generation X—roughly defined as those born between the early 1960s and the early 1980s, and the target demographic for 529 plans—doesn’t have the resources to invest in a college savings fund. They’re already plagued by student debt, high rent costs and wages that have barely increased in years; plus, many are still struggling to recover the money they lost during the 2008 recession.
But here’s a silver lining: The number of Americans who do contribute to 529s increased significantly since 2012, from 5.5 million households to more than 10 million, investing almost $204 billion at the end of 2013.
If a 529 plan sounds like it could be a good fit for your family, find out how to open a fund and start saving now.