Millennials are becoming known for changing the way things are done. After getting stuck with the majority of the $1.4 trillion of student loan debt, it should be no surprise that they are trying to change the way their kids will pay for college.
Millennials are starting college funds for their kids much earlier than previous generations did, according to a study by Sallie Mae and Ipsos Public Affairs. About 57 percent of millennials start saving for their kid’s college before their child is 5 years old, compared to only 33 percent of baby boomers.
The study also shows that 38 percent of millennial parents feel parents should be completely responsible for paying for their kid’s college. More than half of parents plan to pay for college, up nearly 10 percent from last year. They are making real plans to save, often depositing money automatically from each paycheck.
The way millennials are saving is also changing. Many put money into savings accounts, but increasingly they are putting money into 529 college savings plans. These savings plans have more savings potential because they are tax-free as long as the funds are used for college expenses for the beneficiary. In the past few years the IRS has even added that funds from a 529 savings plan can be used to purchase computer technology used for school, including internet.
Millennial parents seem to be saving more money than previous generations, averaging $20,155 versus the baby boomer average of $18,323 and Gen X average of $12,428 in 2016. This also translates to greater optimism about saving enough to cover all college expenses. In fact, 88 percent of those who made a plan to save for college are confident that they’ll meet those goals.
Once again, millennials are leading the charge by starting early and setting real goals to pay for their kids’ college. After being stuck with so much student loan debt, they are learning to prevent the same fate for their children. After all, the universal hope of all parents is that their children will be better off than them, right?
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