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Despite high student loan balances, Millennial parents are saving for college
http://www.savingforcollege.com/articles/despite-high-student-loan-balances-millennial-parents-are-saving-for-college-1091

Posted: 2017-09-06

by Kathryn Flynn

With unique attitudes toward saving, spending and family life, millennials have become the most talked about generation in history. Their financial behaviors have been shaped by the post 9/11 recession and student loan crisis, so it's no surprise they tend to be risk-averse investors who feel it's important to save for college regardless of how much debt they owe.

These 19-36 year olds (in 2017) are being criticized for delaying home ownership and spending too much money on avocado toast, yet they're saving more than any other generation. According to a study from Merrill Edge, on average millennials put away 19 percent of their income per year. That's more than Boomers and Gen Xers, even though millennials typically have smaller salaries and more credit card and student loan debt.

But it's what they're saving for that's been making recent headlines.

Retirement isn't always a priority

The Merrill Edge Report suggests that younger workers are more concerned with being able to achieve financial freedom than planning for traditional retirement. They're also more likely to spend money on travel, dining out and fitness than put away money for the future. (Yet 60 percent of millennials aren't counting on Social Security to be around when they leave the workforce).

What's more, according to a study from T. Rowe Price, millennial parents prioritize education for their children and having an emergency fund over planning for retirement.

High aspirations for college

Millennials have student debt, but they don't want their children to. Savingforcollege.com's 2017 Annual College Savings Survey, which was administered to website visitors who were researching college savings options, revealed that nearly half (47%) of parents ages 25-34 carry a student loan balance. What's more, T. Rowe Price's study found that millennial parents owed an average of $9,180 in student debt, and $11,995 in other debt, yet those who were saving for college were putting away an average of $310 per month. Two-thirds of these parents are confident that they'll be able to pay off their student loans before their children go to college.

Where are they getting the money to save? According to the study, millennial parents are willing to cut back on eating out and entertainment spending, and spend less on themselves in order to free up funds for college savings. Bringing costs down is another common strategy. Respondents of Savingforcollege.com's study were planning to apply for scholarships and focus on less expensive schools.

But it's not just millennials who are planning for college - parents across the board appear to be concerned about higher education expenses. Savingforcollege.com's survey revealed 68 percent of respondents had already started putting money away, up from 62 percent last year and 41 percent in 2015. The majority (81%) of these parents are investing in 529 plans, which offer tax-free investment growth and tax-free withdrawals when the funds are used to pay for college. The study also showed that misconception about 529 plans appear to be declining, suggesting that they've become a more mainstream investment product, at least among more affluent parents.

RELATED: Top 10 financial mistakes millennial parents make

With unique attitudes toward saving, spending and family life, millennials have become the most talked about generation in history. Their financial behaviors have been shaped by the post 9/11 recession and student loan crisis, so it's no surprise they tend to be risk-averse investors who feel it's important to save for college regardless of how much debt they owe.

These 19-36 year olds (in 2017) are being criticized for delaying home ownership and spending too much money on avocado toast, yet they're saving more than any other generation. According to a study from Merrill Edge, on average millennials put away 19 percent of their income per year. That's more than Boomers and Gen Xers, even though millennials typically have smaller salaries and more credit card and student loan debt.

But it's what they're saving for that's been making recent headlines.

Retirement isn't always a priority

The Merrill Edge Report suggests that younger workers are more concerned with being able to achieve financial freedom than planning for traditional retirement. They're also more likely to spend money on travel, dining out and fitness than put away money for the future. (Yet 60 percent of millennials aren't counting on Social Security to be around when they leave the workforce).

What's more, according to a study from T. Rowe Price, millennial parents prioritize education for their children and having an emergency fund over planning for retirement.

High aspirations for college

Millennials have student debt, but they don't want their children to. Savingforcollege.com's 2017 Annual College Savings Survey, which was administered to website visitors who were researching college savings options, revealed that nearly half (47%) of parents ages 25-34 carry a student loan balance. What's more, T. Rowe Price's study found that millennial parents owed an average of $9,180 in student debt, and $11,995 in other debt, yet those who were saving for college were putting away an average of $310 per month. Two-thirds of these parents are confident that they'll be able to pay off their student loans before their children go to college.

Where are they getting the money to save? According to the study, millennial parents are willing to cut back on eating out and entertainment spending, and spend less on themselves in order to free up funds for college savings. Bringing costs down is another common strategy. Respondents of Savingforcollege.com's study were planning to apply for scholarships and focus on less expensive schools.

But it's not just millennials who are planning for college - parents across the board appear to be concerned about higher education expenses. Savingforcollege.com's survey revealed 68 percent of respondents had already started putting money away, up from 62 percent last year and 41 percent in 2015. The majority (81%) of these parents are investing in 529 plans, which offer tax-free investment growth and tax-free withdrawals when the funds are used to pay for college. The study also showed that misconception about 529 plans appear to be declining, suggesting that they've become a more mainstream investment product, at least among more affluent parents.

RELATED: Top 10 financial mistakes millennial parents make

 

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