How do parents feel about saving for college? How many different words are there for anxious?
In a survey of 1,988 parents released today, the majority of parents described saving for college with words like “worried,” “frustrated,” and “overwhelmed.”
In the 2015 “How America Saves for College” report from Upromise by Sallie Mae, parents reported saving less for everything—including college—in 2014 than they did in 2013. The reason cited by most (61%): they just don’t have enough money left over at the end of the month.
The average annual amount put aside for college in 2014 fell to $2,566 from $3,016 in 2013. The average accumulated college savings also declined, to $10,040 from $13,408.
That said, the survey found that parents are still putting a high priority on their children’s education, continuing to earmark around 10% of their savings for college. But along with saving fewer actual dollars, many are putting what money they have in low-paying investments that will likely lag tuition inflation. Nearly a quarter said they were saving in their checking accounts, and 15% said they were socking away college money in CDs, both of which currently pay almost no interest.
Fewer than 30% of parents said they used tax-advantaged 529 college savings plans; worse still, fully 52% of those surveyed said they’d never heard of a 529 plan and thus didn’t know that they could put money aside for college and let it grow tax-free, and might even get get a state tax break on their contributions to their kids’ accounts.
Not surprisingly, parents with low and moderate incomes reported being the most worried. But even parents earning more than $100,000 a year, who were the biggest savers, were still plenty fretful. Only 30% of the wealthy described themselves as “confident” in their ability to pay for college.
The wealthy were the most likely to take advantage of the tax benefits provided by 529s: Almost half of families earning more than $100,000 reported using a 529 plan, compared with 20% of those earning between $35,000 and $100,000 and 17% of those earning less than $35,000. (For help feeling a little less anxious, here’s advice on choosing the best 529 plan for you.)