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January 22, 2006 at 02:00 PM
Many boomers waited to have children until relatively late in life, studies show, and experts point out this raises the likelihood of a conflict between two key financial goals for boomer parents: saving for retirement and putting the kids through college.
Advisors often tell boomers that saving for retirement comes first, trumping college education and most other savings goals. However, a recent study jointly sponsored by Vanguard Group Inc. and Upromise Inc. suggests parents don’t agree. Where there is a conflict, the kids’ college education generally is holding its own in the battle for a share of the parents’ savings.
Although the study was not limited to boomers, about half of the participants were over 40, notes John Heywood, a Vanguard principal who runs the company’s education markets group. Moreover, findings were not much different among various parent age groups.
There were some distinctions among those in the boomer population, though. For instance, those aged 40+ were more likely than under-40s to rank saving for retirement as their greatest concern.
In addition, 40+ people were more likely to be saving for their children’s education and were also more likely to expect their children to contribute to their own education by earning money while at school.
Overall, the study found, 95% of parents expected to send a child to college. Of those, about 64% currently were saving for it.
In addition, 37% said saving for their child’s higher education was a primary concern, compared to 34% who identified saving for retirement as primary.
Among those actually saving for retirement, 75% said they were very concerned about saving for college.
Among those actually saving for a child’s higher education, the same percentage, 75%, said they were very concerned about saving enough money for the purpose.
Of college savers, the average amount put aside was close to $4,700 per child, or about $7,000 per household. That would cover about a year in tuition, room and board, and other costs of attending a public college, notes Heywood.
Parents’ anticipated sources of funds for education consisted of grants, scholarships and financial aid (85% of those with children 12 and up, and 83% for those with younger children); savings and investments (86% and 90%, respectively); and loans and other outside financing (82% and 80%).
The most striking differences among survey respondents were between parents whose children were getting close to college age and those with younger kids.
