Americans will do anything to send their kids to college, even if they have to put their own financial well-being in jeopardy.
According to a new survey from Gallup and student lender Sallie Mae, the number of parents who view saving for college as their top financial priority jumped to 21% this year, compared to 14% in 2009. Nearly half of all parents said it was one of their top two priorities.
In total, the survey found that 60% of parents have put aside money for their child’s college education, and are on pace to save $48,367 by the time their child turns 18. In fact, the survey found that the recession has had little effect on college savings habits, as the percentage of parents who have put money aside for their kids was largely unchanged this year compared to 2009.
However, parents are resorting to some dubious methods to raise money for college.
Of those parents who have begun saving for college, nearly a quarter have dipped into their retirement accounts and 401(k)s in order to put more money into their child’s college fund, the survey found.
Meanwhile, just one quarter of parents have taken advantage of 529 college savings plans, despite the fact that they are offered in every state and have the benefit of being tax-free. According to the survey, nearly half of those parents who have not put money into a 529 said the reason was that they didn’t know enough about these plans.
Despite these trends, the survey found that parents who have begun saving for retirement are more confident this year than last year about their ability to pay for college.
On average, parents begin saving for college when their child is 3 years old and put aside approximately $3,000 each year toward this goal, with the amount inching up by a couple hundred dollars as their child gets closer to college.
Saving for college years in advance is one tactic parents can use, but as Mark Kantrowitz noted in a recent MainStreet article, sometimes the better option is to start saving later in the game, rather than put aside money even if you can’t really afford it.
“Even if you start late, you will still benefit financially. Every dollar you save is a dollar less you have to borrow,” Kantrowitz wrote. “And since every dollar you borrow will cost about two dollars by the time you’ve paid off the loan, it is literally cheaper to save than to borrow.”
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