While most families would agree it's important to prepare for their children's college costs, very few know about 529 college savings plans, according to a survey released today by Edward Jones. According to the survey, 60% of Americans have no idea what these plans are.
When they were asked to pick the correct description of a 529 plan from a list of choices, which included miscues such as "a form of life insurance," 62% of the respondents chose the wrong answer. And 14% simply said, "I don't know."
The survey of 1,006 respondents, conducted for Edward Jones by the Opinion Research Corporation, proves that many people are still unfamiliar with these tax-advantaged savings vehicles, created 15 years ago, that can help families deal with rising college costs.
The tuition for a four-year public college rose 8% from 2010 to 2011, and the costs are expected to continue rising, according to the College Board.
According to the survey:
* The awareness of 529 plans rises with the wealth level of those surveyed. Only 27% of respondents making less than $35,000 a year knew what the 529 plan was, while 57% of those making between $75,000 and $100,000 annually knew what it was and 62% of respondents making more than $100,000 a year did.
* Respondents who had college degrees were much more likely than other respondents to identify a 529 plan, as 53% of them chose the correct option. This compares with 33% of respondents who attended, but did not complete, college and only 29% of high school graduates and dropouts.
* An estimated 48% of respondents who had children knew what 529 plans were (regardless of their children's ages). Those with children between the ages of 13 and 17 were less likely (43%) than their peers with younger children to identify a 529 plan. More than half of respondents with children under the age of 13 (52%) correctly identified the plan. Those with no children were much less likely to choose the correct option (30%).
* The level of 529 plan awareness differed across the country. Respondents in the Northeast were the most aware, as some 45% knew what the plans were, while respondents in the Midwest followed at 40%. Respondents in the West (33%) and South (35%) were the least aware of them.
Edward Jones branches across the country are recognizing May 29 as "Save for Education Day," a firmwide holiday. To remind communities about the importance of setting education savings goals, financial advisors will be hosting a "529 Day" at their branches and dressing in attire from their favorite college or alma mater. Families are encouraged to stop by their local branches to learn more.
Edward Jones is based in St. Louis and provides financial services for individual investors in the U.S. and, through an affiliate, in Canada.