Most financial advisers urge families to save first for their own retirement and then put money aside for their children’s education, arguing that families can borrow to fund college but not retirement. But Heywood says this often conflicts with parents’ aspirations for their children.
“People hear that and they say, ‘Too bad about retirement savings; my kids are going to college,’” he says. For young families especially, “retirement is farther off than the kids going to college, so there’s less urgency.”
The families who have started saving for their children’s college educations have set aside about $4,700 per child so far, the study found.
About four out of 10 families surveyed were familiar with the Section 529 college savings plans, which are tax-favored programs set up by states to help families save for college. Savings in 529 plans grow tax-deferred, and withdrawals are tax-free when used for education.
Vanguard manages Section 529 programs in New York, Iowa, Nevada and Colorado, and provides fund options in 14 states. Upromise can channel family contributions into 529 plans.
— Associated Press
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