A newly-released study from financial services firm Edward Jones details findings concerning 529 plans and college savings awareness — and the results are troubling.
The company released its fifth annual 529 Plan Awareness Survey this week, finding that 75% of Americans could not correctly identify a 529 plan from four potential options in comparison to 66% last year. The college savings plans first became available in 1996.
"The cost of education remains a top concern for many Americans, and yet the downward trend in 529 awareness persists year over year," said Steve Seifert, Principal at Edward Jones. "We must continue to teach individuals and families about the investments, like 529 college savings plans, that offer attractive and practical ways to save for future college expenses. Balancing multiple savings priorities on a month-by-month basis can be challenging, but we cannot skimp on one goal at the expense of another."
A number of factors contributed to the understanding that the 529 plan is used for college savings, including household income, size, and age. Participants who reported an annual household income greater than $100,000 were found to be more likely to correctly identify the plan at 46%, while just 18% of those with incomes less than $35,000 were familiar. In addition, respondents who had children were more likely to know that a 529 plan is a college savings plan in comparison to those without children (32% vs. 26%). Age also influenced understanding on the topic, with Generation Xers showing a greater understanding (35%) than millennials (24%).
In an effort to increase awareness of 529 plans and other ways to save for college, Edward Jones branches across the country are calling May 29 "Save for Education Day." Because the day falls on a Sunday this year, individual branches will be hosting events in their communities throughout the week beforehand in order to push education savings goals.
The survey also found that 88% of respondents believe earning a college degree is important for future employment, with close to half, or 49%, saying that a college degree is necessary in order to obtain a job. Baby Boomers were the most likely to agree with this at 53%, while millennials were slightly less likely to agree at 43%.
Danae Domian, Principal at Edward Jones, discussed this, saying that although many Americans do agree that it is important to invest in a college education, they are not taking advantage of the tools available to help them do so. "As the cost of college continues to increase, it's especially critical that you do your homework on the investment options available to you. The 529 college savings plan can be a great fit for many families as they prepare for their children's future."
As concerns pertaining to college savings continue to grow, a number of employers are taking notice, with some beginning to offer 529 plan aid in their workforce-benefits packages. In total, 86% of respondents said they would be willing to take part in such a benefit. Of those with children between the ages of 13 and 17, that percentage increased to 93%.
Survey results were based on phone interviews with 1,006 adults in the United States conducted between April 28 and May 1, 2016.