Fewer families are saving for college

by Grace

A  survey, from the Certified Financial Planners Board of Standards and the Consumer Federation of America compared today’s views with those from 1997, a much more prosperous time.

“People today may be more inclined to put their economic security at risk to ‘keep up with the Joneses’,” the report reads. “The only area where families are more prone to save [than 15 years ago] is toward a major purchase, like a new car, vacation, or home improvement project.”…

Specifically, 60 percent of respondents are saving for a major purchase today, compared with 52 percent in 1997.

Despite the soaring cost of a college education, “fewer of those in families with a college-bound child have started to save for college education,” the survey noted, by 48 percent today, versus 56 percent in 1997.

Here’s one possible explanation.

“We have seen this in recession eras before,” says Larry Hugick, chairman of Princeton Survey Research Associates, which conducted the interviews with 1,508 financial decision makers over two weeks in May. “People want to give themselves some sort of treat. They want their vacation.”

College costs are so high that it may seem futile to try to save.

Hugick also speculated that short-term goals, like a new car or vacation may seem attainable by comparison to college expenses. The rapid rise in tuition in recent years has seemed to dwarf the most conscientious saver’s account balance, and Americans wouldn’t be blamed for feeling hopelessness toward covering their children’s college expenses.

Tight credit may also skew consumers’ savings plans.

“It could be that people are saving for major purchases, like a car, that they would previously have used credit to buy,” says Dan Drummond of the Certified Financial Planners Board. “It just shows that people still need help saving toward major goals.”

These are tough times – “lower incomes and tight credit”

Indeed, the financial planners’ study puts some of their findings to lower incomes and tight credit.

Overall, fewer Americans reported saving toward any goal, 80 percent, than did in the salad days of the ‘90s.

“With less money to go around…fewer report saving for emergencies, leaving their family more vulnerable to the upheaval caused by a job loss or major unexpected expenses,” the survey says.

Fifty-two percent of those responding to the survey considered themselves behind when it came college savings; 42 percent say they feel good about their college accounts. Only thirty-eight percent feel as if they are behind on putting money away for that major purchase.

And then there’s this observation from a comment:

The typical American is completely, 100% financially clueless.

Source:  Americans Would Rather Save for Vacation Than Kids’ College (CNBC)

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3 Comments to “Fewer families are saving for college”

  1. I don’t find it shocking, but it’s actually a bit surprising to find that in today’s economy 48% of families with a college-bound kid are able to save for college. Although I’m sure for most the amount saved is relatively modest and would not end up covering the total cost of college.

    I am a bit shocked that not a single mom from your mommy group is saving for college. I’m going to make a big assumption that at least 1/2 of the members are college educated, so that’s eye opening.

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  2. “Saving for college in any case is a perk of the upper middle class.”

    As well as a necessity. I remember back in the day, when I was applying for financial aid, it was quite an eye-opener for my dad to realize that (roughly speaking) every dollar saved for college was a dollar I wouldn’t get in financial aid. (As it happened, they didn’t have a dollar saved for my college.) I don’t know how the math works nowadays, but it’s not unlikely that below a certain income level, saving is pointless, while above that level, it’s a dire necessity.

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  3. Maybe some parents still think students can work their way through college. This is almost impossible to do nowadays.

    Also, I’ve noticed more stories about parents with advanced degrees who have not been saving for college as might be expected because their “real” careers didn’t start until they were close to 30 years old and because they were still paying off their own student loans into their 40s and beyond.

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