Wednesday, June 4, 2014
Seven out of 10 Americans do not know that a 529 plan is a college savings tool, according to the annual 529 Plan Awareness Survey from financial-services firm Edward Jones. In its third year monitoring college savings awareness, the survey found that only 30 percent of Americans could correctly identify a 529 plan as a college savings tool from among four potential options, down from 37 percent during the inaugural 2012 survey.
“Despite the fact that the average cost of an in-state public college totaled $22,828 in the 2013-2014 academic year, we have seen a downward trend in 529 plan awareness over the past three years,” said Dimi Matouchev, financial advisor with Edward Jones in Isle of Palms, South Carolina. “It seems counterintuitive that the costs of higher education continue to rise while awareness for a vehicle than can make this cost more manageable continues to decline. We like to remind our clients that starting a 529 plan savings program as early as possible will help ease the burden as children near college age.”
Significant dips in awareness occurred regionally, especially in the Northeast (39 percent in 2014, down from 45 percent in 2013) and the Midwest (30 percent in 2014, down from 36 percent in 2013). A notable decline in 529 plan awareness also occurred when looking at household income. Among those respondents with a household income between $50,000 and $75,000, awareness dropped from 42 percent in 2013 to 32 percent today.
And while age plays a significant role in awareness level, with those between 35 and 54 expressing the highest levels, it also represents a major opportunity. Respondents 65 and over showed the lowest levels of awareness, with just 18 percent noting they knew that 529 plans were for college savings. 529 plans are designed so that grandparents and other interested parties can contribute as well, so finding ways to increase awareness among grandparents can pay off for future students.
“Grandparents represent an opportunity when it comes to managing the cost of college,” said Matouchev. “We recommend that parents look at tackling college savings as a larger family goal, when possible. Talking to grandparents about participating in 529 plans is an excellent way to build assets in a portfolio – and for the grandparents, it's fulfilling and there may be tax advantages as well.”