While 529 education-savings plans are commonly found in the average financial planner's toolbox, most consumers continue to remain virtually oblivious to their existence, according to a new survey.
A phone survey by Edward Jones of 1,004 U.S. consumers found that 71 percent don't know what a 529 plan is, with only 29 percent correctly identifying the product as an education savings tool.
It was the seventh year in a row in which the annual survey found that a majority of U.S. consumers were not aware of 529 plans and their uses. Also, the 29 percent who correctly identified the plans was down from 32 percent in 2017, Edward Jones said.
"It's concerning to see the percentage of individuals who still don't know what a 529 plans is or understand its usefulness," Danae Domian, an Edward Jones principal, said in a prepared statement. "There's a misperception that only parents can establish these plans. But in reality, any person can set up a plan for any student."
Ignorance about 529 plans seemed to correspond somewhat to age and wealth, according to Edward Jones. The survey found, for example, that 52 percent of individuals from households with an income of $100,000 or more were able to correctly identify 529 plans. Yet only 17 percent of those with a household income of $35,000 or less were able to do the same.
Those in the Gen X generation -- people between the ages of 38 and 52 -- were more likely to identify 529 plans than millennials, who comprise those between the ages of 20 and 37, said Edward Jones. Thirty-five percent of Gen-Xers correctly identified the plans, compared with 27 percent of millennials.
If U.S. consumers aren't aware of 529 plans, then how are they saving for their children's college expenses? Every other way possible, according to the survey.
The most popular method was by just drawing the money from personal savings, with 43 percent citing that as their main strategy. That was followed by scholarships (33 percent), federal or state financial aid (31 percent), private student loans (20 percent) and, finally, 529 plans (13 percent).
About half of U.S. consumers are not doing anything to save for future education expenses, according to the survey. Among respondents with children under 13 years old, only 41 percent are saving for education expenses, Edward Jones said.
"What's alarming is the percentage of individuals with young children who are not saving for future education expenses," Domian said.