13th annual survey finds only half
of Americans are aware of 529 plans, and most don't think they're
saving enough for education
ST.
LOUIS, May 20, 2024 /PRNewswire/ -- Even though
529 plans are an important tool for education savings, many still
are unaware of their uses, according to new research financial
services firm Edward Jones conducted with Morning Consult. Half of
Americans (50%) don't know what a 529 plan is and fewer than a
quarter have a 529 plan. What's more, only one out of every four
adults (25%) knows that 529 plans can be used to fund more than
just higher education. The primary barrier is the perception that
more savings or income are required to open a 529 account.
"Thanks to tax law changes over the past seven years, 529 plans
are more useful and applicable than ever, and can often be used
tax-free and penalty-free for secondary schools, technology
purchases to further education and much more," said Andy Esser, an Edward Jones Financial Advisor in
Durham, NC. "As a financial
advisor and parent, I see first-hand the varying benefits of 529
funds – no matter what path a child may choose. Educating families
on those benefits leads to more impactful results."
In fact, compared to survey results from 2023, there has been an
increase (6%) in the number of adults who are more likely to
consider saving for a vocational or trade school (27%) due to the
impact of inflation/high interest rates, while saving for the
conventional four-year college path has remained a less popular
path to save for (22%).
Knowledge Gaps Remain
A 529 education savings plan is an investment account that
offers tax benefits when used toward qualified education expenses
for the account beneficiary. Earnings grow tax-free, and when used
for qualified education expenses, distributions are federally
tax-free. With the 2022 passage of the Secure 2.0 Act, 529 account
owners can roll over unused 529 assets to a Roth IRA for the 529
beneficiary, subject to certain criteria and limitations.
Of Americans who are already saving for education through a 529
plan, the majority (77%) know that 529 plans can be used to fund
more than just higher education. However, a broader understanding
of the various uses of 529 plan funds is lacking. The minority of
Americans know that 529 plans can be used for vocational and trade
schools (47%), room and board (43%), repayment of student loans
(41%) and rollover funds to a Roth IRA (19%).
Though one-third of Americans saving for a child's education
(32%) do not know what a 529 plan is, the features of the savings
plan resonate with many. In fact, three out of five Americans (61%)
say the tax benefits make them more inclined to enroll in a plan.
Other popular features that made Americans more compelled to
consider 529 plans include the flexibility to control their 529
accounts (58%) and using the money to pay for qualified education
expenses (56%).
The State of Education Savings
Recent legislation has made parents more likely to save for a
child's education. In fact, the SECURE 2.0 Act allowing investors
to roll up to $35,000 of unused 529
funds into a Roth IRA for the beneficiary under certain conditions
has made more than one-third of adults (34%) more likely to save
for a child's education.
Respondents also say they are more likely to save for their
children's education because of the estimated costs surpassing
$90,000 at some colleges and
universities (24%), rulings about college admissions criteria (24%)
and the increase in applicants per college and waitlist decisions
(22%). When asked what would make them feel better about covering
the costs of future education expenses, 29% said the possibility of
new legislation aimed at reducing college costs would help.
One-third of parents saving for a child's education (32%) are
currently enrolled in a 529 plan for themselves or a family member,
and they're starting early. In fact, 12% of parents with an infant
or toddler and 19% of parents with a preschooler already are saving
for future education needs with a 529 plan. What's more, 34% of
parents saving for their child's education would prefer that
friends and family contribute to 529 plans and education savings
goals instead of giving gifts like toys, technology and gadgets for
holidays and birthdays.
Despite being more likely to save for education, the majority of
Americans (60%) do not feel they're saving enough to reach their
goals for future education expenses.
To reach education savings goals, one-third of adults (35%) have
or have planned to use a personal savings account as part of their
education savings strategy. Other top strategies include
scholarships (18%) and federal or state financial aid (18%).
Interestingly, one in 10 adults (9%) have or plan to get a job at a
school or university for tuition benefits as part of their
education savings strategy. Even with these methods, the vast
majority of adults (84%) have not or do not plan to invest in a 529
plan as part of their education savings strategy.
Education Savings Conversations Happen, but Not
Enough
Some families are making time to discuss education savings
before making any decisions, but their children often are left out.
Of those who have already discussed 529 plans with their children,
only four in 10 (42%) noted they typically consult their child
before making decisions related to education savings.
The majority of adults saving for education typically consult
family members (56%) before making decisions related to education
savings, but only 31% typically consult their child. Additionally,
one-third of parents (33%) saving for education typically consult a
financial advisor before making decisions related to education
savings.
Financial advisors can act as an objective third party to
facilitate these conversations between parents and children or
advise on the best strategies to meet those educational savings
goals, within the family's broader financial goals.
"It's important for people to have a financial advisor
understand what's most important to them – whether that be
education, retirement or something else – and marry those
priorities with the right tax-advantaged vehicles," added Esser.
"With the recent enhancements to 529 plans, I'd encourage anyone to
speak with a trusted advisor to revisit how they're investing for
their family's future."
To continue to raise awareness for 529 plans and education
savings strategies, Edward Jones offers a Financial Fitness program
through its partnership with EVERFI. The initiative has helped more
than 900,000 learners increase their financial knowledge since
2020, well on its way to reaching a goal of one million learners by
the end of 2025. Edward Jones branches across the country recognize
May 29 as "Save for Education Day" to
raise awareness for 529 plans and education savings.
Survey Methodology
This survey was conducted by global data intelligence company
Morning Consult among a national sample of 2,202 adults ages 18+
from April 22-25, 2024.
About Edward Jones
Edward Jones is a leading financial services firm in the U.S.
and through its affiliate in Canada. The firm's nearly 19,500 financial
advisors serve more than 8 million clients with a total of
$2 trillion in client assets under
care at the end of March 2024.
Edward Jones' purpose is to partner
for positive impact to improve the lives of its clients and
colleagues, and together, better our communities and society.
Through the dedication of the firm's approximately 54,000
associates and our branch presence in 68% of U.S. counties and most
Canadian provinces and territories, the firm is committed to
helping more people achieve financially what is most important to
them. The Edward Jones website is at www.edwardjones.com, and its
recruiting website is www.careers.edwardjones.com. Member SIPC.
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SOURCE Edward Jones