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