Stock market gains account for much of the rise but advisers doing their part too.
The amount of money in the nation's Section 529 college savings plans has hit a record $180 billion as more families invest in the tax-efficient vehicles to save for the ever-increasing cost of college.
Assets in the plans through March 31 increased 7% from the $168.5 billion in the plans at the end of last year, according to research firm FRC, a unit of Strategic Insight. Much of the increase is due to market appreciation since the Dow Jones Industrial Average gained nearly 9% in the first quarter.
About $3.3 billion of the increase came from net inflows in the first quarter, compared with $2.9 billion of inflows the same period last year.
“Families are starting to see a little growth in the economy, and they may have refinanced their house and are able to save a little more each month,” said Brock Jolly, a financial adviser with Capitol Financial Partners. “I think the 529s become a beneficiary of that.”
Parents also are being moved by the increased focus on the climb in the cost of college over the past decade and the resulting debt that many students face when they graduate.
“I think there has been such a spotlight in the last year or two on increasing college costs and the tremendous amount of debt being incurred by students and their parents,” said adviser Harvey Meldrum, founder of Meldrum Financial LLC. “As a result, more people are reaching toward this vehicle.”
Roger Michaud, chairman of the College Savings Foundation and a senior vice president at Franklin Templeton Distributors Inc., which manages New Jersey's 529 plans, said he believes advisers are the reason behind the increase in college savings.
“Financial advisers are heavily involved in college planning today and they are having the conversations with clients that lead to savings,” he said.
Many advisers tell him that they never have the retirement savings conversation without also talking about college savings to show clients how they can do both.
Advisers are sharing hypotheticals with clients that illustrate a successful strategy so that “the child doesn't have a tremendous debt burden and the parents get to retire,” he said.
