Before most Americans start saving for their kids’ college tuition, a new Edward Jones survey suggests that they first need to do a little studying themselves.
The financial services firm surveyed more than 1,000 Americans and found that 62% had “no idea” what a 529 college savings plan means. And they even had multiple answers to choose from including “a form of life insurance” or “a college savings plan.”
Another 14% just gave up and admitted they simply didn’t know.
In an effort to raise awareness for 529 plans, Edward Jones branches around the country are recognizing May 29 – not the play on the date, 5/29 – as Save for Education Day. To remind investors about the importance of setting education savings goals, financial advisors will be hosting a “529 Day” at their respective branches and dressing in attire from their favorite colleges or alma maters. Families are encouraged to stop by their local branches to learn more about planning for their children’s educational future.
Edward Jones officials said the survey, conducted by Opinion Research Corporation, reinforces the growing problem that many Americans are facing today – the rising costs of higher education. Tuition costs of four-year public colleges jumped 8% from 2010 to 2011, and they are expected to continue to rise, according to the College Board.
Created in 1996, a 529 plan is a tax-advantaged savings plan designed to encourage preparing for future college costs.
The survey found general awareness for 529 plans rises with the wealth level of those surveyed. Only 27% of respondents making less than $35,000 a year identified a 529 plan, while 57% of those making between $75,000 and $100,000 annually and 62% of respondents making more than $100,000 annually identified the correct answer.
Also, respondents who have college degrees were much more likely than other respondents to identify a 529 plan, with 53% choosing the correct option. This compares to 33% of respondents who attended, but did not complete, college and 29% of those whose education ended with high school or earlier.
Just about half (48%) of respondents with children of any age indicated they knew about a 529 Plan. Those with children between the ages of 13 and 17 were less likely (43%) than their peers with younger children to identify a 529 plan. More than half of respondents with children under the age of 13 (52%) correctly identified a 529 Plan. Those with no children were much less likely to choose the correct option (30%).
There was a slight difference in 529 plan awareness across the country. Respondents based in the Northeast had the highest levels of awareness (45%), with respondents in the Midwest following at 40%. Respondents in the West and South had the lowest levels of awareness (33% and 35%, respectively).
Larry Barrett writes for Financial Planning.