More parents saving for college, but amount socked away is puny

The number of parents who have saved at least $5,000 for their children's college years has rebounded since 2009, according to an annual online survey conducted by the College Savings Foundation. About 45% of parents with college-bound children said they have saved more than $5,000, up from 40% who said the same in 2011. The figure has climbed steadily since a 2009 survey found that less than a third of parents had saved at least that amount. “Coming out of 2008 and early 2009, many families sat on the sidelines and said they wouldn't make a decision about saving for college until things turned around,” said Roger Michaud, chairman of the College Savings Foundation and a senior vice president at Franklin Templeton Investments.

ADVISERS HAVE HELPED

The survey also found that families who have a financial adviser are likely to save more than those without one. About 65% of the parents who use a financial adviser said they have socked away at least $5,000 for their kids' college education. In comparison, only about a third of parents who don't use an adviser have saved that much. This is not surprising. About two-thirds of the money that flows into Section 529 college savings plans — which is one of the most popular ways to save for college — is directed by a financial adviser relationship, Mr. Michaud said. Then again, $5,000 isn't exactly a large sum, particularly when the cost of college over four years is likely to be about $250,000 per student, said Fred Amrein, principal of Amrein Financial. “It's great that people are saving, but one of the biggest issues is figuring out the best way to save for college,” and that differs among families, Mr. Amrein said. The College Savings Foundation survey found that families are starting their college savings earlier than in the past — with some beginning even before their babies are born. A total of 57% of parents said they had started saving for their children's college before those kids were 5 years old, with 8% of parents saying that they had begun saving before their children were actually born. In last year's survey, a little more than half said they had begun college savings before their children were 5. About a third of the parents said they have not yet begun saving for college. Of those who have, 30% are using 529 plans, which allow participants to choose from certain investment portfolios. The funds grow tax-free as long as they are spent on higher education. Nationally, there's $158 billion in about 10 million 529 accounts, according to Financial Research Corp. [email protected] Twitter: @skinnerliz