A study carried out by Allianz Life of North America that measures the effect of the economy’s impact on college savings found that one in four people are reducing or stopping their contributions to their children’s college education.
The study showed that 25% of U.S. households are contributing less toward their children’s college education — or have stopped saving entirely. 44% have not started saving at all.
A meager 15 percent have reduced spending on other things to keep saving/paying for their children’s college educations.
“This could mean that students will have to be more creative in their use of grants and loans in order to make up potential shortfalls,” said Katie Libbe , Vice President of Consumer Insights at Allianz Life, writes InsuranceNewsnet.com.
“Retirement and college savings often draw from the same bucket of available funds, and people have a hard choice to make,” said Libbe. “Our research shows that lower income households feel paying for their children’s education takes priority over saving for their own retirement. We also found that between the sexes, 39 percent of men placed saving for their own retirement ahead of saving for their children’s college education, versus 27 percent of women. Conversely, 53 percent of women felt that retirement and college savings were equal priorities, versus 37 percent of men.”
Many parents are feeling the squeeze. Eileen Summer at Childbirth Education gives these five tips on How to Prepare For Your Kids’ College Education:
- Research on the various college saving plans. Currently, in the market there are so many different types of college saving plans that offer different advantages.
- Choose a prepaid college tuition plan instead. These plans give you the option to lock in the current college tuition costs which you do not have to deal with the increasing cost later.
- Start early. When your kid is still a baby, it is the best time to get started. This allows you to put money into the children college saving fund every month but a lesser amount compared to parents whose children are in grade school and they have to put in a bigger amount to save for the kids.
- Put regular savings into your kids’ college education fund. Every month, you can put aside a fixed amount of money from your paycheck to your kid’s college education fund which you set up for them.
- Use parent’s name for the college savings accounts. This enables the parents to control the money or else the kids may use the money for their fun.
“The toll taken by recent economic volatility has yet to be fully calculated, but one thing is certain: it has directly impacted how people are approaching saving for retirement and college,” said Libbe.