Fate had an indiscriminate and random way to liberating money from your wallet. A car break-down that cost 20% of your disposable income or a roof leak of similar extent will put you on a tight budget for the month and depreciate your savings. Bad luck or unexpected expenses is usually quoted for failure to save. Sharing the blame would be the escalating cost of living. These common reasons the man on the streets frequently hears but backing them up with research will give it better credibility.
Last year an average of $13,408 was set aside for college by parents but it was reduced to $10,040 this year. Savings for all purposes, including retirement and emergencies, also plunged to $98,867 from $115,604 last year. Sallie Mae, a corporation that offers financial products to help families save and plan for college, engaged market research company Ipsos to conduct a research to account for a 25% drop in saving for college.
Ipsos interviewed 1,988 parents of children under 18 for the survey between Jan. 14 and Jan. 28. "The biggest reason for the decrease in savings are the increase in the cost of living and having unexpected expenses come up," said Michael Gross, head of the higher education practice at Ipsos. About half the parents are saving for college. For families with incomes between $35,000 and $100,000 the rate fell to 46 percent this year from 51 percent last year.
The outlook on investing in higher education for children is still good. 90% parents believe that college is an investment in their children's future. 84% believe their children will earn more with higher education. 78% think that a college degree is more important now than in the past. General savings accounts remain as the most widely used vehicle to save for college funds. It was used by 48% of the savers. 23% used checking accounts and 27% used 529 plan.
The 529 plan is tax-advantaged instrument for saving for the future higher education expenses of a designated beneficiary. It was named after the act (Internal Revenue Code 26 U.S.C. § 529) that legislated it. The 539 plan is popular high-income savers. 49% used it. It only manage to draw 20% of middle-income and 17% low-income savers. 40% of those who do not save for higher education were unaware of the existence of 529 plans.
Parents who don't save overestimate the amount of financial aid their children will receive. Scholarships and grants typically cover about one-third of the total average cost of college, according to a corollary Sallie Mae study. About two-thirds of those who don't save believed their child would get scholarship help to cover college costs.
Martha Holler, a Sallie Mae representative said the act of creating a plan for college savings seems to boost the odds of success. The 2015 Saving for College survey found families with a plan saved 46 percent more than families without a plan. Parents began to save when their oldest child was 6.5 years old. This the time where the initial expenses of infancy and the toddler years are over, Reuters reported on 29 April 2015.
