A research brief released Oct. 4 by eARN Research Institute found that while the majority of parents prioritize saving for their children’s higher education, they wish there were better accounts and means to save for higher education.
The survey of 1,001 parents of at least one child younger than 18 found parents have many different goals and priorities for their children. Their children earning a college degree is a priority for 87% of parents who see a degree as an important opportunity. Graduating from high school and “getting a good education” is a priority for 98% of parents. Education is tied with health and slightly prioritized above getting a good job (96%) and being financially secure (92%.) A few things are less important to parents than their children earning a college degree, such as owning a home (74%) or having a skill or trade (82%.)
More than half of parents (53%) are “very concerned” or “extremely concerned” that their children will not be able to afford college, with parents in lower-income households and minority-led households expressing the most concern. In households earning $50,000 or less annually, 65% of parents are very concerned or extremely concerned about college affordability. At all income levels, 69% of Latino parents and 63% of black parents report high levels of concern compared to 46% of white parents.
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Approximately 57% of parents have any type of savings, and the majority of those parents lead households that earn at least $50,000 per year. Only 36% of households with an income of $50,000 or less have any form of savings, compared to 78% of households that earn more. Of parents who have savings, 75% have begun saving for their children’s education—but not necessarily higher education.
However, for 69% of families regardless of income, saving for their child’s education is their first or second priority, even higher than emergency, retirement, future home purchase, vacation, or other savings. Slightly more than half of parents (53%) have begun saving for higher education. Across all income levels, parents with two or three children are more likely to have saved for college (55%) than parents with one child (51%) or with four or more children (48%.)
The survey found that savings varies by parents’ educational attainment as well. Of parents with college degrees, 68% have begun saving; of parents with some college but no degree, 47% have begun saving; and of parents with a high school diploma or less, 35% of parents have begun saving. The survey’s authors say these findings suggest that if a child’s parents are lower-income or did not go to college, the child is at a disadvantage when it comes to higher educational affordability.
Of the 53% of parents saving for college, the most common means of saving (38%) is through a standard bank-issued savings account. Nearly one in four use a 529 plan; 13% use savings bonds; 9% put their savings “in a safe place, but not a bank or anything formal;” and 5% contribute to a Coverdell Education Savings Account. The survey found that as household income increased, so did the likelihood of saving for college using a 529 plan.
Parents who don’t save cite a few reasons why not. The most common reasons are limited financial resources and other financial priorities. Other reasons include concern about how savings might impact financial aid eligibility; concern about how savings might impact taxes; children are still young; they are unsure how to start saving; or they haven’t found the time.
Follow Anna Schumann on Twitter at @ASchumannCMN.