Kids & Money

Millennials lead the way in planning, saving for college

A recent report showed millennial parents are saving more so that their kids can make their way to leaf-strewn college campuses, like this one at Whitman College in Washington.
A recent report showed millennial parents are saving more so that their kids can make their way to leaf-strewn college campuses, like this one at Whitman College in Washington. The Associated Press

Here’s a win for millennial parents: They’re socking away more for college than their Gen X and baby-boomer counterparts.

Proof comes from the latest “How America Saves for College” survey by Sallie Mae, the educational financial services company, and the Ipsos research firm.

The survey, released this fall, found that millennial parents reported saving an average of $20,155 so far for their kids’ college. That’s slightly higher than boomer parents, who have saved an average of $18,323, and well ahead of Generation X parents, who reported setting aside an average of $12,428.

Researchers also noticed that millennial parents’ attitudes on several college savings questions reflected greater optimism than either of the older generations, including having a plan to pay for college, and showing a greater willingness to ask family members and others outside of the family to contribute money to the college kitty.

The survey defined millennials as 35 years old and younger, Gen Xers as 36 to 51 and baby boomers as ages 52 to 70.

What contributed to these generational savings differences? There are no easy conclusions, but the researchers did suggest that fallout from the Great Recession and overall confidence in the future were contributing factors.

“In contrast to Millennials’ optimism, Gen Xers tend to be more cautious when they think about saving for their children’s future education,” the report said.

Other key findings:

▪ More parents, especially millennials, are confident in their ability to meet the future costs of college — 55 percent this year compared with 42 percent in 2015.

▪ For the first time since Sallie Mae began the study in 2009, the percentage of parents creating a college savings plan exceeded 50 percent.

▪ The number of college-savings parents using 529 state-sponsored college investment accounts reached its highest level since the study began.

▪ In contrast to the positive trends, about one in three parents surveyed said they feel overwhelmed about the thought of saving for college — enough so that they’re not doing anything.

There was one other troubling finding — the lack of family conversations about college costs. It should go without saying that parents talk to their kids about how to minimize college costs and where the money will come from to pay tuition, room and board.

Yet, the survey noted that 20 percent of the parents with teenagers acknowledged they had not had any such discussions.

Besides a heart-to-heart with your kids, Sallie Mae offered a three-step approach to ensure that some money will be there when the tuition bills arrive.

▪ Open a savings account designated for college funds. Deposit birthday gifts from family and friends and sign up for free programs that reward you with cash back for college.

▪ Set a goal and make deposits regularly. Use automatic deposits so the money is transferred to savings seamlessly. For example, $50 per pay period amounts to $1,300 a year, and $13,000 over 10 years.

▪ Explore tax-advantaged investments, such as 529 savings accounts, that generally offer more bang for the buck.

Steve Rosen: 816-234-4879

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