Millennials Saving More for Kid’s College than Older Generations

Millennials Saving More for Kid’s College than Older Generations

A joint survey conducted by SLM Corp., better known as Sallie Mae, and market research firm Ipsos Public Affairs found a sharp increase in the overall percentage newer parents are putting away for college.

Study Results
The survey of 1,959 parents this year showed millennial parents report saving $20,155, a slightly larger amount than the baby boomers, who saved an average of $18,323. Generation X parents, however, put away a much smaller amount – $12,428.

Millennials were defined by the study as 35 or younger, Gen-Xers from 36-51, and baby boomers in the 52-70 range.

According to the study, 57% of parents with kids under the age of 18 are saving for college this year, up 48% from last year.

Making Sense of the Findings
The overall savings trends make sense considering the rising cost of college tuition, but the enormous gap between the millennial generation and Gen-X suggest more fundamental differences, perhaps related to the financial crisis and recession and generational priorities. Some Gen-Xers who were hit hard by the recession, for example, likely had to adjust after losing jobs or paying off large mortgages.

The study also found millennial parents were more likely to start saving for their children’s college education early, which may be driven by an expectation to pay a larger share of out-of-pocket college costs than their counterparts in older generations.

Julia Clark, senior vice president and market researcher at Ipsos, believes millennials place a higher priority on the college experience, and the memory of their own student debt is likely fresh in their minds. It makes sense that millennials want to help their children avoid the trials and tribulations they endured from student debt.

Generation X parents are often under substantial financial pressure, caught between assisting aging parents and raising their own children, making it tougher to save for college. According to Ms. Clark, they may need to allocate their resources differently, choosing different priorities when it comes to spending dollars versus saving dollars.

The combination of declining home values, income stagnation, and falling stock values during the recession hit Gen-Xers the hardest, who may have also had millennial children living with them when the financial crisis hit.

The average Generation X family underestimated annual inflation rates and assumed most of their children would go to college in-state. These factors probably led to the study’s finding of lower confidence about their college savings funds. The unfortunate result is that many Gen-X families are paying for college with current cash flow and putting off retirement by 5 to 7 years.

With all of your financial responsibilities, it can be difficult to put away money for your kids’ future college tuition, but every little bit means less stress down the road. Discuss a plan that works for you with a knowledgeable advisor.

An Integrated Approach to Wealth Management
For more information on financial planning, risk management, and wealth management from OptiFour’s wealth management experts, please visit our homepage today!