Good news—participants are segregating retirement assets from other spending priorities to ensure the assets last, according to a new study.
College loan giant Sallie Mae finds that, after saving for general needs and emergencies, parents earmark funds for college more than for any other specific purpose, alongside retirement.
Yet only 10 percent of parents plan to tap their retirement funds for college, down from 20 percent in 2016—the last time this report was published.
To keep their college savings on track, six in 10 parents (61 percent) contribute a set amount to their college fund on a regular basis, and rather than sacrifice retirement savings, they’re better about budgeting in other areas.
In fact, 30 percent of parents have cut back on discretionary spending, and 27 percent have reduced their household expenses.
This year marks the first time that tax-advantaged 529 college savings plans hold the largest share of college savings—30 percent. That said, fewer than one-third of parents saving for college are using them (29 percent).
Most parents who are not using 529 plans report not being aware of or knowing enough about them, or not having enough money to invest in them.
“This year’s report findings reflect America’s rising consumer confidence levels overall,” Julia Clark, senior vice president at research firm Ipsos, who conducted the study on Sallie Mae’s behalf, said in a statement. “The data show that parents are making smarter—and more optimistic—decisions about their plans for education for their children.”
Nearly nine in 10 parents who have a college savings goal (86 percent) are confident they’ll achieve it.
The average goal is $55,342, and parents are about one-third of the way toward meeting it, an improvement from 2016, when parents had saved roughly one-fourth of their goal. On average, parents start saving for college when their child is age seven.
Parents who have planned how they’ll pay for college have saved more than twice as much as those without a plan ($22,169 vs. $9,208). They are also three times more likely to be confident they’ll be able to meet the cost of college than those who haven’t planned (73 percent vs. 27 percent).
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
