By the College Savings Plans Network
March 13, 2013
The College Savings Plans Network recently published its 2012 Year-End 529 Report and found that the total amount invested by American families in the plans has reached a record high of $190.7 billion. In 2012, total assets in the plans grew by $25.86 billion dollars, more than three times as much as the $7.43 billion increase in 2011. Additionally, the total number of accounts increased 3.7% over the past 12 months, going from 10.7 million in December 2011 to 11.1 million as of December 2012.
This is encouraging news, as more families are making a concerted effort to save for the increasing costs of a higher education as seen by the increase in average account size to a record high of $17,174 at the end of 2012.
Unfortunately, the College Board’s recently published Annual Survey of Colleges indicates that in-state tuition, fees, room and board at public four-year institutions averaged $17,131 in 2011-2012. This means the average investor in a 529 plan has saved enough for one year of education at a public college or university.
Although this is only a quarter of the cost of public higher education, it’s important to remember that any money saved for college, is money that a family will not have to take out as loans and repay with interest.
Define your savings goals: Determine how much you want to save for your child’s education. Do you want to save for tuition only or room and board, as well? All four years of college or just two? Public or private college? Defining your goals will help you to establish how much you should save and measure your progress.
A College Cost calculator can help determine the estimated cost of college when your child is ready to enroll. This could help you decide how much to incorporate into your monthly budget for college savings.
Nearly every state offers at least one 529 plan. You can determine which college savings plan best fits your needs by comparing 529 plans by feature and state. States often offer special benefits for residents such as state income tax deductions/credits, matching grants, or scholarship opportunities.
Start early and save often: If you can, start saving as early as possible. The earlier you start saving the easier it is. You’ll be able to put away a smaller amount and will have more time for your money to potentially grow.
Routine Reviews: It’s also advisable that you routinely review your account and determine if your risk tolerance or life circumstances have changed. Things like having another child or a change in job status can influence how much you can afford to save. So make sure to review and adjust your savings strategies accordingly.
The 2012 Year-End 529 Report findings indicate that millions of American families continue to invest in higher education for their children, and see 529 plans as a good choice for their investment. With more than 11 million 529 plan accounts open nationally, we are starting to see a greater percentage of families using 529 plans to save for higher education, but we clearly have a long way to go. Our mission remains one of helping all American families who have college dreams for their children or grandchildren to save in advance for future college expenses to minimize or eliminate reliance on future student loan debt.