Instead, the majority of parents polled for a recent Charles Schwab survey are keeping their fingers crossed for outside financial help. Over half of those parents surveyed expect their child’s education to be funded with scholarships or grants, with 41% anticipating financial aid to make up the difference.
Further, college savings is relatively low on the savings totem pole for many parents. In fact, college savings comes in fourth after saving for home improvement, followed by saving for retirement and emergencies. Overall, saving for college only managed to rank higher than saving for a vacation and buying a new car.
This is because parents see college funding coming from a variety of sources other than possible scholarships and financial aid. The survey shows that nearly 60% of respondents have set up some form of college savings plan for their children, yet 60% are expecting to use household salary and wages to pay for their children’s college expenses.
Of those that have not set up any type of college savings program, seven out of 10 cite “too many debts” and “other financial priorities” as the top reasons for not yet investing. Additionally, while more than two-thirds of respondents agree they are on the path to having adequate retirement savings, 42% admit they have a hard time staying ahead of debts.
Therefore, it should come as no surprise that 64% said they have less than $100,000 in total savings and investments, excluding home equity. That means, excluding possible inheritance or other monetary gifts, they will have far less than the $151,000 minimum it will take to pay for four years of in-state public college costs for a child born today, the Schwab survey projects.
The lack of college savings is not due to a lack of caring. Rather, parents are feeling pulled at both ends. Parents today are in a tough spot with several important priorities, such as home ownership and retirement, competing for their savings dollar,” said Rande Spiegelman, vice president of the Schwab Center for Investment Research.
Spiegelman believes that relatively small regular investments or occasional lump sum deposits can be the key to college savings. “Whether it’s contributing a $100 a month, a birthday check from a relative, or a portion of your annual raise or bonus, every bit adds up. Even unexpected money, like the recent child tax refund, can provide the springboard many people need to get their college investing started,” said Spiegelman.