VANGUARD/UPROMISE SURVEY REVEALS SAVING FOR COLLEGE IS TOP FINANCIAL WORRY AMONG PARENTS
VALLEY FORGE, PA, and NEEDHAM, MA, January 5, 2006 – Financing a higher education is the top financial concern among parents, ahead of saving for retirement and purchasing a home, according to a national survey released today by The Vanguard Group® and Upromise. The national survey comprised 1,109 interviews of adults who have children aged 17 or younger living at home.
The study also revealed that nearly all of the respondents expected their children to pursue higher education, but only half had started saving for college. Respondents who were saving had accumulated approximately $4,700 per child, which is just sufficient to fund one year at a public university, according to data from the College Board.
“We are encouraged that saving for college has become an important financial goal for American families, although it is clearly evident that many need to step up their savings efforts,” said Vanguard Principal John Heywood, who directs the mutual fund firm’s education markets group. “With college costs increasing every year, parents would be well-served to start saving earlier, saving more, and saving smarter through tax-advantaged plans.”
The Vanguard/Upromise survey found that nearly four of ten parents who expected their children to pursue higher education were familiar with 529 college savings plans—state-sponsored programs that enable families to save for college free of federal taxes. Most contributors to 529 plans were parents, followed by grandparents. Overall, 87% of 529 plan investors cited tax-free withdrawals as the top reason for investing in the plans and believed this tax advantage should be permanent.(1)
“The federal tax exemption afforded to 529s is scheduled to expire at year-end 2010,” said Mr. Heywood. “Without an extension, the savings of millions of families at all income levels will certainly be affected. We would hope that Congress would make this a priority when it returns in January.”
The Vanguard/Upromise survey also found notable differences between families with younger children (under age 12) and those with older children (ages 12–17). More families with younger children were saving for college (64%) versus those with older children (59%). Additionally, more than a third of families with younger children reported that grandparents and other relatives were helping them to save compared with a quarter of families with older children. When asked to identify major sources of funding, families with younger children pointed to programs such as 529 savings plans, while families with older children cited student loans.
“It is a promising sign that ‘younger’ families are starting early with their own savings plans and getting grandparents, aunts, and uncles to pitch in,” said Jim Fadule, president of Upromise Investments, Inc. “These personal savings efforts can make a meaningful difference over the long run.”
Since teaming up in 2001, Vanguard and Upromise have become the largest direct-to-consumer providers of 529 plans.
The Vanguard Group, headquartered in Valley Forge, Pennsylvania, is the nation’s second-largest mutual fund firm and a leading provider of employer-sponsored retirement plan services. Vanguard is also a leader in the 529 college savings marketplace, offering investment options in 14 state 529 plans totaling more than $10 billion in assets. Vanguard manages more than $910 billion in U.S. mutual fund assets, including $270 billion in employer-sponsored retirement plans. Vanguard offers 130 funds to U.S. investors and 40 additional funds in foreign markets.
Upromise is the country's largest nongovernmental service helping families save for college. Membership is free and allows families to automatically save money for college while making everyday purchases at more than 20,000 grocery and drugstores, 14,000 gas stations, 8,000 restaurants, thousands of retail stores, and over 350 online shopping sites. Upromise's partners include Citi®, Coca-Cola®, ExxonMobil, Kimberly-Clark, McDonald's®, JCPenney.com, LandsEnd.com, Sears.com, and hundreds of others. Upromise also makes it easy for families to invest in tax-advantaged college savings plans and to use contributions to pay off student loans. The 529 college savings plans are offered through Upromise Investments, Inc. (member NASD/SIPC). Upromise is headquartered in Needham, Massachusetts. For additional information, visit
www.upromise.com
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For a copy of the study, please contact the Vanguard Public Relations Unit (610.669.5002)
All asset figures as of November 30, 2005 unless otherwise noted.
Vanguard Marketing Corporation, Distributor
Upromise is a trademark of Upromise, Inc.
(1) Unless extended, the federal tax benefit will expire after December 31, 2010. Earnings on non-qualified withdrawals may be subject to federal income tax and a 10% federal penalty tax, as well as state and local income taxes. The availability of tax or other benefits may be contingent on meeting other requirements.
