(AUSTIN) — New research shows Texas parents, like parents nationwide, say their children’s college education is their highest savings priority, even more important than saving for retirement, a home or other goals.
Yet only 32 percent of U.S. savers and 26 percent of Texas savers are confident they can achieve their college savings goals. For parents who plan to save for college, but haven’t started yet, confidence that they will be able to afford to send their children to college plummets to 14 percent nationally and 19 percent in Texas. Half of Texas parents agree with the statement, “No matter how hard I try, I will never have enough to pay for my children’s college education.”
These are findings from the first annual College Savings Confidence Index commissioned by OFI Private Investments, the OppenheimerFunds subsidiary that manages investments in Texas’ 529 College Savings Plan.
“An educated work force is strategically important for Texas to thrive in a competitive economic climate,” said Texas Comptroller Susan Combs, chairwoman of the Texas Prepaid Higher Education Tuition Board, which oversees Texas’ 529 plan. “This study indicates families need information to help them maximize their college savings and boost their confidence that they can achieve their higher education goals. The Texas College Savings Plan can give them the tools they need.”
Cogent Research surveyed 500 U.S. households and 300 Texas households with children under 18 who are expected to go to college. The study examines the savings activity, awareness of college savings options and confidence in achieving college savings goals among “savers” (those currently saving for college) versus “future savers” (those who plan to begin saving for college in the future).
“We developed the College Savings Confidence Index to show the ‘reality gap’ that exists for families as they struggle to make the dream of a college education a certainty,” said Raquel Granahan, director of 529 College Savings Plans for OppenheimerFunds. “State-sponsored college savings plans and financial services firms have a lot of work to do to educate families about 529 plans and other savings options.”
Higher education can mean better jobs, higher wages and a higher standard of living for Texans. According to the 2000 U.S. Census, the average annual household income for Texans with a bachelor’s degree was just under $81,000, compared to $42,271 for high school graduates.
Though parents know the importance of a college education to their children’s futures, their college savings do not reflect it. Median college savings in Texas are $7,500, compared to $17, 500 among U.S. savers.
“Over the last five years, the average increase in tuition and required fees at Texas four-year public colleges and universities was 11 percent per year,” Combs said. “The great news for Texas parents is that Texas now has two high-quality, low-cost, strong performing 529 plans that can help families save enough to meet those expenses.”
Parents indicated in the survey that investing in a 529 plan would be more attractive if the plan offers tax advantages, low fees and expenses, an online enrollment option, online tools and fewer investment choices. The Texas plans offer competitive fees, low minimum contributions, online enrollment, online account management tools and the plans now offer more investment choices.
“While we do recognize that sometimes more choices can mean having to do more research, we believe, when it comes to saving for college, families need as many options as possible to meet their individual financial needs,” Combs said.
The direct sold Texas College Savings Plan and the advisor sold LoneStar 529 Plan are convenient, affordable and flexible with investment portfolios tailored to different savings timelines, financial situations and risk tolerance. An account can be opened for $25, and future contributions can be as little as $15. Contributions can be automatically transferred from your bank account or deducted from your paycheck. Fees are very competitive with other college savings plans of this size.
The plans’ Web sites feature useful account management tools to help map a path to a college savings goal; assess progress; and make contributions, withdrawals and other account transactions online.
Money invested in the plans earns tax-free returns, and account withdrawals are also tax-free if the money is spent on qualifying college expenses. Assets in the plans may be used to pay tuition and fees, plus other college expenses like room and board, books and supplies.
To open a Texas College savings plan account directly through the state, call
(800) 445-GRAD(4723) or visit the Texas College Savings Plan Web site at www.texascollegesavings.com. College savers may wish to contact an investment adviser to enroll in the LoneStar 529 Plan or visit the plan Web site at www.lonestar529.com for more information.