Parents inch closer to college saving goals, study says
NEW YORK (Reuters) – When optimism and realism about college savings collide, you get parents who are confident that they will meet their goals – as long as they reduce the amount of money they save, that is.
According to the latest “How America Saves for College” report from lender Sallie Mae, 90 percent of parents who have set a college savings goal say they will meet it.
But perhaps this is because they cut the amount they plan to save to $55,342, down from $61,902 last year.
Regardless, the reality is that parents have saved a fraction of what they think the need to cover college tuition, despite brighter economic times, according to the report, which was released on Wednesday.
Overall, net college savings are up, but the average amount saved now is just $18,135, compared to $16,380 in 2016.
RULE OF THIRDS
The savings numbers align with a strategy recommended by college funding experts: sock away one-third of the cost of college; pay for another third out of current income, and lastly, finance the final third with loans, grants or other assets.
Several factors consistently help boost savings, according to the Sallie Mae study.
The first is just to have a savings goal. The next is setting up a plan to save – those with a plan saved 2.5 times more than those without a savings framework in the survey.
Mark Kantrowitz, who publishes Private Student Loans Guru (www.privatestudentloans.guru), notes that 529 college savings plans also help parents meet their savings goals.
When families use 529s, they know where their college money is and can make adjustments. The amount saved per 529 account has nearly doubled this year, to $5,441 from $2,820, according to Sallie Mae.
“We are heading in the right direction, but there is still more to do,” said Kantrowitz. “Everyone can save a little, even $25.”
Editing by Lauren Young and G Crosse