COLLEGE SAVINGS 101

Savingforcollege.com

Are parents getting savvier about saving for college?
http://www.savingforcollege.com/articles/are-parents-getting-savvier-about-saving-for-college-933

Posted: 2016-05-24

by Kathryn Flynn

As we approach the 20th anniversary of the 529 plan, the results of two recent surveys reveal that there's still an opportunity for Savingforcollege.com and financial advisors to educate families about the importance of including college savings in their overall financial plan.

The results of Savingforcollege.com's third Annual College Savings Survey showed that:

  • Nearly half of parents want to pay for at least 75 percent of their children's college costs
  • Only 32 percent feel confident about being able to afford their children’s college costs
  • Seventy-seven percent of parents say they are currently using a 529 plan to save for college, up from 55 percent last year
  • Sixty-two percent say they will be opening a 529 plan in the near future, up from 52 percent in 2015
  • Fifteen percent would tap into their retirement fund to cover future tuition costs, and 55 percent would consider sending their child to community college for two years to help soften the blow.

Similarly, a recent survey from Edward Jones revealed that 88 percent of Americans felt that higher education was important for those with career aspirations, yet 72 percent didn't know what a 529 plan was, compared to 66 percent in 2015.

RELATED: 6 must-know 529 plan rules

Is there growing or shrinking awareness of 529 plans?

The big difference between these two surveys is that the respondents of the study from Savingforcollege.com were people who were already saving for a child's college or planned to do so, and those who participated in the Edward Jones survey were selected at random, and may or may not be paying for college in the future. This implies that the averageAmerican may not be savvy about 529 plans, but there may be a growing awareness among those seeking a college savings option.

According to the Edward Jones survey, parents were more familiar with 529 plans than those who didn't have children (32 percent versus 26 percent). Those with an annual household income of at least $100,000 were 28 percent more likely to know what a 529 plan was than a family who made less than $35,000 per year. The survey also looked at generational differences, revealing that Gen Xers were the most knowledgeable about 529 plans, and millennials were the least.

Among those saving, or planning to save, for college, respondents of the Savingforcollege.com survey scored more correct responses in this year's survey to a series of true or false questions related to 529 plans than they did in 2015. However, misconceptions still persist, especially when it comes to financial aid eligibility and plan ownership rules.

RELATED: 7 myths and realities of 529 plans

Where to turn for help with understanding 529 plans

Fortunately, organizations like Savingforcollege.com and Edward Jones are continuing to work hard to educate families who have future education costs to pay about the benefits of saving. To celebrate 529 Day, Savingforcolege.com hosts an annual Q&A webcast where the familiies can ask industry experts questions like "how can I get started with a 529 plan?" and "how will a 529 plan affect financial aid?" And Edward Jones holds events in their branch offices during the month of May to raise awareness about college savings.

Families who are looking for help setting up a college savings plan, or want to know how to best fit one into your family's financial plan, may want to sit down and meet with a financial advisor, suggests Steve Steifert, Principal at Edward Jones.

"We really do think it's important that people take the time to set up and talk with an advisor and use the resources that are out there. With so many 529 plans available, there are advantages to using some over others. There's just so much choice today, and given that a college education can have so much impact on a child's future, it's just too important to take lightly and to not invest a little bit of time in it."

Among those respondents of the Savingforcollege.com survey who haven't started saving for college yet, 36 percent said they plan to consult a financial advisor for help selecting a 529 plan. The top reason cited was that respondents needed help understanding their options and creating a college savings plan.

And Seifert is confident that an Edward Jones advisor, or any trained financial advisor can help.

"We put a whole lot of effort into helping our advisors be equipped to have this conversation with their clients. Studies have shown that some parents would rather work longer, take a second job and even take away from their own retirement rather then let their kids go into college debt. Given that, for an advisor not to talk about it is leaving an important conversation with the client on the table," he says.

"The help is available- it doesn't cost anything to sit down and have a conversation with somebody and even if you have in mind what you want, getting a second opinion is probably not a bad idea," he says.

RELATED: You're saying my financial advisor can help me plan for college?

As we approach the 20th anniversary of the 529 plan, the results of two recent surveys reveal that there's still an opportunity for Savingforcollege.com and financial advisors to educate families about the importance of including college savings in their overall financial plan.

The results of Savingforcollege.com's third Annual College Savings Survey showed that:

  • Nearly half of parents want to pay for at least 75 percent of their children's college costs
  • Only 32 percent feel confident about being able to afford their children’s college costs
  • Seventy-seven percent of parents say they are currently using a 529 plan to save for college, up from 55 percent last year
  • Sixty-two percent say they will be opening a 529 plan in the near future, up from 52 percent in 2015
  • Fifteen percent would tap into their retirement fund to cover future tuition costs, and 55 percent would consider sending their child to community college for two years to help soften the blow.

Similarly, a recent survey from Edward Jones revealed that 88 percent of Americans felt that higher education was important for those with career aspirations, yet 72 percent didn't know what a 529 plan was, compared to 66 percent in 2015.

RELATED: 6 must-know 529 plan rules

Is there growing or shrinking awareness of 529 plans?

The big difference between these two surveys is that the respondents of the study from Savingforcollege.com were people who were already saving for a child's college or planned to do so, and those who participated in the Edward Jones survey were selected at random, and may or may not be paying for college in the future. This implies that the averageAmerican may not be savvy about 529 plans, but there may be a growing awareness among those seeking a college savings option.

According to the Edward Jones survey, parents were more familiar with 529 plans than those who didn't have children (32 percent versus 26 percent). Those with an annual household income of at least $100,000 were 28 percent more likely to know what a 529 plan was than a family who made less than $35,000 per year. The survey also looked at generational differences, revealing that Gen Xers were the most knowledgeable about 529 plans, and millennials were the least.

Among those saving, or planning to save, for college, respondents of the Savingforcollege.com survey scored more correct responses in this year's survey to a series of true or false questions related to 529 plans than they did in 2015. However, misconceptions still persist, especially when it comes to financial aid eligibility and plan ownership rules.

RELATED: 7 myths and realities of 529 plans

Where to turn for help with understanding 529 plans

Fortunately, organizations like Savingforcollege.com and Edward Jones are continuing to work hard to educate families who have future education costs to pay about the benefits of saving. To celebrate 529 Day, Savingforcolege.com hosts an annual Q&A webcast where the familiies can ask industry experts questions like "how can I get started with a 529 plan?" and "how will a 529 plan affect financial aid?" And Edward Jones holds events in their branch offices during the month of May to raise awareness about college savings.

Families who are looking for help setting up a college savings plan, or want to know how to best fit one into your family's financial plan, may want to sit down and meet with a financial advisor, suggests Steve Steifert, Principal at Edward Jones.

"We really do think it's important that people take the time to set up and talk with an advisor and use the resources that are out there. With so many 529 plans available, there are advantages to using some over others. There's just so much choice today, and given that a college education can have so much impact on a child's future, it's just too important to take lightly and to not invest a little bit of time in it."

Among those respondents of the Savingforcollege.com survey who haven't started saving for college yet, 36 percent said they plan to consult a financial advisor for help selecting a 529 plan. The top reason cited was that respondents needed help understanding their options and creating a college savings plan.

And Seifert is confident that an Edward Jones advisor, or any trained financial advisor can help.

"We put a whole lot of effort into helping our advisors be equipped to have this conversation with their clients. Studies have shown that some parents would rather work longer, take a second job and even take away from their own retirement rather then let their kids go into college debt. Given that, for an advisor not to talk about it is leaving an important conversation with the client on the table," he says.

"The help is available- it doesn't cost anything to sit down and have a conversation with somebody and even if you have in mind what you want, getting a second opinion is probably not a bad idea," he says.

RELATED: You're saying my financial advisor can help me plan for college?

 

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