A little less than one-third of families now saving for their child's college education have any confidence they will meet their goals, says a recent study by OFI Private Investments, a subsidiary of OppenheimerFunds.
The survey results are based on 500 families with children under 18 years old who expect to go to college, and it was evenly divided between those currently saving for college and those who aren't currently saving but who plan to so in the future. Those saving now earned only a "D" grade for their efforts while those planning to save later earned an "F."
Income differences account for some of the disparity between those already saving and those who intend to do so. Current savings in the survey had an average family income of $114,750, while those planning to start saving averaged $67,150. But savings habits were also influenced by a lack of information about state-sponsored 529 plans and their tax benefits, says Raquel Granahan, director of 529 College Savings Plans for OppenheimerFunds.
Half of those now saving for college currently use 529 plans or say they will use them, but as of now have only 20% of their actual college savings are in 529 accounts. More than half in the group of future savers said they did not understand 529 plans.
"Families saving for college have to understand college saving and retirement saving affect each other and they may have to rethink their retirement plans," Granahan says. "Proper education, expert guidance and a variety of sound options represent the keys to improving the grades of both savers and future savers."