What College Fund? Less Than Half of Parents Save for Higher Ed

Jennifer Liu
Posted

College costs are rising more than ever.

And yet, when it comes to socking away for future tuition, fewer than half of all parents are making the grade.

new study by Sallie Mae reveals that just 48% of moms and dads are actively contributing to their kids’ college funds.

This stat is a new low for Sallie Mae’s annual survey, which saw a peak of 62% of parents saving in 2009. By 2013, the percentage of parents socking away for tuition had dipped to just 50%.
What’s more, those college caches are looking leaner than ever.

The average amount saved is now just $10,040, a significant 25% decrease from the $13,408 socked away in 2014—and the lowest amount in five years.

Curiously, despite their lack of sackings, the study found that nine out of 10 parents do believe that building a college fund is an important investment in their child’s future.

So what’s stopping them from socking away?

Not surprisingly, 61% of parents cited lack of resources as the number one reason for their savings shortfall. But almost two-thirds also said they believe their kid will score enough in scholarships to cover college costs.

And even those parents who are saving are making a few key mistakes as well, Sallie Mae found. Most significantly, just 27% are taking advantage of tax-favored 529 plans—nearly half are simply socking away for college in general accounts.

Still, there was some good news on the savings front: the study also found that many parents are working on building better money habits. For example, 41% of moms and dads are now using an auto-deposit service to make the savings process routine. Plus, 31% set aside a certain amount from their paychecks for college—up from 26% in the past year.

RELATED: 9 Mistakes Not to Make with 529 Savings Plans

  • Greg Haney

    Interesting. I graduated high school in 2007 and attended a 4 year public university on my own, my parents could not pay the cost. Worked my butt hard to earn 2 partial scholarships for tuition, but still needed to work a full time job during school to pay costs.

    In the end I graduated college without student loans, having worked for my own education. I value that experience extremely high, and plan on setting up my future children for the same. I understand that some parents can afford to help their kids with college costs, but that is a gift, not an entitlement. College is meant to prepare young adults to bring skills/benefit to the workforce, having them pay for said education can be an equal, if not more, valuable experience.

    Fyi, in no way is my experience manageable for everyone, I shared just as an alternative viewpoint and the high value I took away from the experience. I had to work extremely hard and pretty much had zero social life to accomplish and earn my degrees. When it came down to it, I had my priorities in my education and my future, not “college life” as the entertainment industry depicts it.

    • Kellie

      I agree. It’s not an entitlement or a requirement. The best thing we, as parents, can do to help the next generation is to make sure that we can take care of ourselves as time goes on – so the kids don’t have to.

      • toni

        Great comments guys. I attended college in the US (I’m from Jamaica) and even though I got a merit scholarship for my tuition my parents had to pay living expenses. This was still a burden for them as them as the exchange rate is by no means favorable. I was always cognizant that I HAD to finish my engineering degree in 4 years, since that’s when my scholarship was up. I stayed extremely focused and while I don’t have these earth-shattering college memories because I was always studying, I don’t regret it. When I started working a colleague of mine was lamenting about having to pay back her student loans. It was in that moment that the gravity of what my parents did hit me and I remember I called them that evening to tell them thanks. They always told my brother and I that they may not be able to give us everything other people had growing up but they will give us both a Bachelors degree; anything after that we had to pay for it ourselves. My brother and I have both gone on to get our master’s and we both worked for awhile to save then go back to school. With that being said, one of my goals if I ever become a parent is to definitely give my kids the same gift of a debt free education.

    • Joiya

      I totally agree with you! I think it’s very valuable to work for paying for your own college. I had a 75% scholarship I got for working so hard during high school, and I left with “only” $10,000 in student loans which I’m working my butt of now to pay off. I highly value taking responsibility for your own situation and not relying on others.

  • Joiya

    My parents didn’t pay for any of my college tuition, but they did pay to keep me alive and sheltered when I was going to college. So far going to college hasn’t made me a significant amount of money more than other people I know who didn’t go. Going to college is not the only life path there is. And college doesn’t teach you actual work skills. I think it’s totally up to the parent’s whether or not they should save for their college tuition, but as a parent I would want my kids to learn to take care of themselves and not rely on mommy and daddy. And that means taking charge of their own college tuition. Because the worst thing I’d want to see is that I pay for their tuition and they end up bailing out of college or doing nothing with their degree, which I’ve seen it happen.