National survey of parents reveals missed opportunities to improve and expand education savings accounts
SAN FRANCISCO--(BUSINESS WIRE)-- EARN, a California nonprofit and leading provider of goal-based savings products, announced today findings from a national survey of parents that sheds light on the rising role of savings on education, as well as barriers faced by parents to accessing the “right” education savings products. The EARN Research Institute’s new research brief, “Saving for Higher Education in the US: Parents’ Beliefs, Behaviors, and Preferences,” reveals that nearly 7 in 10 US parents (69%) say that saving for their child’s education is either their first or second saving priority, as compared with 56% who say that emergency savings is one of their top two priorities and 47% who prioritize retirement savings in their top two.
Although most parents believe that having a good education (98%) and a college degree (87%) are important opportunities for their children, only 53% are actually saving for their child’s education beyond high school. For parents in households earning less than $50,000 a year, this is a greater challenge as 60% report having no college savings, compared to only 33% of households with higher earnings. Among college-educated parents, 68% have started saving for their children’s college education – nearly double the percentage for parents with a high school education or less (35%).
According to the survey, parents who are saving for college are most commonly doing so through regular savings accounts (38%). Less popular are education-specific accounts such as 529 plans (23%) and Coverdell accounts (5%). Participation in types of savings products varies by income, suggesting that current education savings accounts are more attractive to parents with higher incomes. Among college-saving parents from households earning less than $20,000 a year, 27% are putting their deposits “in a safe place, but not a bank or anything formal.” Parents from households with incomes over $100,000 most commonly use 529 plans for education savings (39%) and regular savings accounts (36%).
Still, parents’ preferences about specific account features are consistent across income brackets: 79% of all parents say they are more likely to use an education savings product if deposits are guaranteed not to lose value, and 74% say they are more likely to use accounts that have no minimum balance requirement. Sixty-nine percent of parents state that they would be more likely to use an education savings account that allows them to make deposits in person or online, and a significant majority prefer accounts where the use of funds is restricted to their children’s educational expenses. Regardless of income, 50% of parents say they are less likely to use savings accounts that can gain or lose value.
“The EARN Research Institute’s report reveals a tremendous missed opportunity,” says Nga Chiem, Vice President of EARN. “The overwhelming majority of parents want to save for their children’s education, but there is no education savings account that meets their needs. Given the national conversation about college affordability and college debt, improving college savings products is crucially important for families and for our nation. Our report recommends practical improvements that would better meet parents’ needs and therefore give more children a better path to college.”
Results are based on telephone interviews with a nationally representative sample of 1,001 parents within the United States. Respondents were parents or legal guardians of at least one child under the age of 18. Telephone interviews were carried out using a dual sampling frame consisting of both landline (n=771) and cell phone (n=230) extensions. The survey was conducted by Fairbank, Maslin, Maullin, Metz & Associates (FM3) in June 2012, and the data were collected through English and Spanish interviews. The estimated sampling error for the complete set of respondents is +/- 3.1 percentage points.
EARN is a nonprofit that gives low-income working families the power to create prosperity for generations. Since 2001, we have helped tens of thousands of low-wage families save for a better future through innovative savings products. The EARN Research Institute evaluates the impact of EARN’s work and publishes original data, sharing lessons learned and best practices. We use this unique grounding in rigorous applied research and direct service experience to transform the financial services landscape and to champion effective public policies. EARN’s ultimate vision is that millions of well-informed, working American families will achieve financial success through proven strategies, fair public policy, and their own hard work. Connect with EARN at www.earn.org, facebook.com/earn.org, and twitter.com/earn.