NU Online News Service, May 29, 11:23 a.m. – U.S. parents now believe they must save an average of $80,400 to pay for college tuition for one child, up from about $45,000 in 2001, according to Harris Interactive Inc., Rochester, N.Y.
Harris researchers based the results on a survey of 500 U.S. parents conducted in March and a similar survey conducted in early 2001.
The survey was sponsored by AEGON Institutional Markets Inc., Louisville, Ky., a unit of AEGON N.V., The Hague, Netherlands, that sells stable-value funds to college savings plans.
The survey results appear to bode well for companies that sell stable-value funds and other conservative investments: researchers found that 70% of the parents participating in the second survey described themselves as conservative investors, up from 61% a year earlier.
But the researchers also found that parents had unrealistically high expectations about stock market returns. The parents surveyed were expecting an annual average return of 19%. The expected return was down from 24% in 2001, but still about twice as high as the historical average.
Only a quarter of the participants were expecting an annual return of less than 10%.
Thirty-one percent of the parents said they started to save for college when their children were less than 12 months old, but 33% waited until after their children were 5 years old.
The most commonly used college savings vehicles were bank savings accounts, mutual funds, savings bonds, stocks, money-market accounts, certificates of deposit, and education independent retirement accounts.
Only 4% of the parents were using the new 529 college savings plans.