A checking account is a checking account

http://www.savingforcollege.com/articles/a-checking-account-is-a-checking-account

Financial Professional Content

Sallie Mae recently released "How America Saves for College 2013", the third edition of its much-followed annual survey, conducted by Ipsos Research. The headlines following its release were alarming:

"Families report high college savings goals, but don't have a plan to meet them"
"Families saving less for college"
"Parents robbing retirement to pay for college"

I appreciate a good survey as much as anyone. The results can provide useful insights and uncover trends, either positive or negative. However, there is usually much more to be found in the survey details than the headlines and executive summaries might suggest.

Sallie Mae found that 50% of survey respondents—parents with children under 18—were currently saving for college. This is a decided drop from the 60% saving for college in its 2010 survey. Even more alarming was the average amount built up in college savings, $11,898 in 2012 versus $21,615 two years earlier.

Wait a minute, haven't the stock and bond markets done well in the past two years? Why would average savings drop by nearly half?

One possible reason, noted in the fine print of the data tables, is due to a change in survey methodology and question phrasing between 2010 and 2012. But who knows how much of the difference is attributable to those changes?

Another noteworthy aspect to Sallie Mae's survey is that it targets a very broad income range. Twenty-nine percent reported family incomes of less than $35,000. That particular income range is not usually considered a target market for college savings. It stands to reason that this group expects that government grants and financial aid will pay for 24% of college costs, which is three times the 8% figure provided by the families with incomes of $100,000 or more.

Another well-developed survey, the College Savings Indicator Study from Fidelity investments, excludes any family with income less than $30,000. That study's findings may be more relevant to anyone in the college savings industry.

The most meaningful positive statistic I found in the Sallie Mae survey is not evident in the headlines quoted above. Of the 50% who were saving for college, 74% reported saving the same, or more, than the year before, with only 16% saving less.

Furthermore, of those NOT saving for college, fully 71% of those parents with family income of $100,000 or more had at least heard of 529 plans. This compares to 13% of parents with family income below $35,000 having heard of 529 plans.

The most discouraging survey result: 27% of respondents who do save for college reported using a bank checking account as a college savings account, the same percentage that reported using a 529 plan for college savings. The checking account figure drops to "only" 21% for families with $100,000 or more in income.

C'mon people. A checking account is used to make out checks, not as an investment.