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JC Lupis | Marketing Charts | Mon, 10 Oct 2016 13:00:43 +0000

Some 55% of parents with children under the age of 18 feel confident that they’re ready to meet the future cost of college, according to a report from Sallie Mae and Ipsos [pdf]. Confidence tends to be higher among younger parents, who have different attitudes to their older counterparts about saving for college.salliemaeipsos-accounts-used-by-college-saving-parents-oct2016

Indeed, Millennials parents (aged under 35) are the most willing to ask people outside of their family to help pay for college (64%), and they’re also the most likely to have started saving early (56% started when their child was 0-5 years old).

Perhaps as a result, 65% of Millennial parents feel confident in their ability to meet the future cost of college. Baby Boomer parents (48%) and those with children near college age show lower levels of confidence.

These trends – and several others – are discussed in MarketingCharts’ recent comprehensive study, Marketing Financial Services to Millennials.

Overall, the 55% feeling confident is a significant step up from 42% last year and 44% the year before. This could relate to the extent to which savings for college has also increased. This year 57% report saving money into a college fund, up from 48-51% doing so in the previous 3 years.

This makes saving for college second in the ranking of savings goals, slightly behind only emergency funds (58%), and ahead of retirement funds (56%) and general funds (53%).

Interestingly, the parents who are saving for college are much more likely to be using a general savings account (61%) than accounts designed for college savings, such as 529 plans (37%), Coverdell/Education IRAs (24%) and prepaid state plans (24%).

Still, when averaging out the share of respondents’ college savings, 23% are held in restricted college savings accounts (529 plans – 17%; Coverdell ESAs – 3%; and State prepaid tuition plans – 3%), about equal to the 22% held in savings accounts.

Lack of awareness may be limiting use of 529 plans: just 39% of parents reported awareness of these plans, although awareness was much higher among affluent ($100k+) families (65%). Among those not using 529 plans, the top reason given was that they don’t have enough money (22% share of respondents). Other important reasons were preference for another method (16%) and not knowing enough about them (16%).

That suggests that financial advisors could help families saving for college. (The role of financial advisors is a key area discussed in the MarketingCharts study.) In fact, parents are more likely to have turned to friends and family (37%) and online tools (27%) than they are to have used a financial advisor (26%) for information on how to save for college.

For much more detail on how families are saving for college – and their progress towards goals – download the study here [PDF].

About the Data: Sallie Mae produced “How America Saves for College 2016” with Ipsos, which conducted online interviews with 1,959 parents between May 26, 2016, and June 6, 2016. The survey sample reflected a cross-section of key demographic variables in the United States. Respondents were able to take the survey in English or Spanish.