Many parents hope to pay for a substantial amount of their child’s college costs, but may have trouble saving enough to reach their goals. Monetary gifts from family and friends to a child’s college savings account can be one way to help close the gap.
A Saving For College survey found that most parents welcome gift contributions for their child’s college funds, but hesitate to ask for various reasons. The survey results point to an opportunity for parents, grandparents and other relatives and friends to have more proactive conversations when it comes to gift-giving preferences. A college savings gift can be far more meaningful for both gift givers and recipients than a toy or other short-lived present, offering a lasting impact that grows over time.
Parents have ambitious education savings goals
Saving For College surveyed 870 parents and grandparents who are actively saving for a child’s education. 88% of parents surveyed are using a 529 plan to save, and an additional 7% intend to open one.
Among parents, the survey found that many want to use their savings to pay for a large amount of their child’s college expenses: 34% said they want to cover all costs including tuition, room and board, and books; 35% said they want to at least cover tuition and fees.
Almost half of the parents said they are saving for a public 4-year college or university. Four years at an in-state public college is projected to cost about $200,000 in 18 years. This means that new parents today may have a goal of saving $100,000 to $200,000 in 18 years, more if they are considering an out-of-state public college or a private university. Reaching a $200,000 goal would require saving over $460 per month for 18 years, assuming an annual rate of return of 7%.
Saving this much can be a challenge for many parents. Financial gifts to a child’s college savings accounts are one way that family and friends can help ensure that child can attain a higher education while reducing their student debt burden.
Parents want college savings gifts for the holidays, but may not ask
One-third of parents surveyed indicated that they ask family and friends to contribute to their child’s college savings fund in lieu of toys or other gifts on gift-giving occasions. An overwhelming 94% of this group indicated they would like their child to receive gift contributions to their college savings fund this holiday season. However, 41% of these parents will only let family and friends know this if they are asked for a gift suggestion.
Will you let family / friends know that you would like your child receive a college savings gift contribution for the holidays?
Among the two-thirds of parents that don’t ask for college savings gifts, many would be open to receiving gift contributions, with 44% indicating they “don’t know how to ask or feel uncomfortable asking.”
Why do you not ask for gift contributions for your child’s college savings account? (Respondents could select all that apply)
48% of this group indicated it might be easier for them to ask for contributions if gift givers ask for gift suggestions.
What would make it easier for you to ask for contributions? (Respondents could select all that apply)
31% of parents also indicated that having a link to share with family and friends via text, email or social media would make it easier to ask for contributions. The good news here is that most 529 plans offer some type of online gifting platform allowing account owners to receive gift contributions directly to their 529 accounts.
College savings gifts can add up over time
Of parents who ask for college savings gifts, 37% reported receiving between $100 and $499 in the past year, while 33% received $500 or more. To get a sense for how that might impact a college savings fund, imagine a family that gets $500 per year in gift contributions to their 529 plan for 18 years. These contributions would total $9,000, and at an annual rate of return of 7%, they would be worth almost $17,000 at the end of 18 years.
How much did your child receive in college savings gift contributions in the last year?
Even if a gift giver doesn’t contribute directly to a child’s 529 account, parents can set aside a portion of cash received for birthdays, holidays or other events and make the contribution themselves. In fact, most parents reported that gift contributions came in the form a cash or check to the parent.
How have gift givers made contributions to your college savings account? (Respondents could select all that apply)
Many grandparents want to help save for college
Grandparents can and often do play a role in saving for college. Among grandparents surveyed, 84% have opened a 529 plan for a grandchild, often because the parents hadn’t opened a 529 plan themselves. For some grandparents setting up a 529 plan may also be viewed as leaving a legacy directly to their grandchild, as almost half cited wanted to be able to give this gift directly. Tax benefits and maintaining control were other reasons cited for grandparents opening their own 529 plan.
Why did you choose to open a 529 plan yourself, rather than contributing to a plan established by your grandchild’s parent? (Respondents could select all that apply)
Of grandparents that hadn’t opened a 529 plan, 68% indicated they would consider contributing to a 529 account opened by the grandchild’s parent rather than opening their own.
Tips for Parents and Gift Givers
Let’s face it, talking about money can be awkward. So here are some tips to help parents and gift givers overcome their discomfort.
Parents
- If you haven’t yet, look into the electronic gifting options offered by your 529 plan. If available, set up a profile page for your child and be prepared to share the link on gift-giving occasions and include it on wishlists.
- Think about who in your child’s life has shown an interest in gift-giving, such as grandparents, aunts and uncles, godparents, or close family friends. Let them know that college is an important goal for your child, and that you’ve set up a college savings plan to prepare for that. Inform them that gift contributions to that account are welcome in place of other types of presents.
- If you feel unsure about how to say that, keep in mind that it doesn’t have to come off as a request for money. You can frame the request by letting loved ones know that your child has plenty of toys, and that no gifts are necessary. But if they want to give something that could have a meaningful impact on your child’s future, a contribution to their college savings account in any amount would be welcome.
Grandparents
- Ask your grandchildren’s parents how or if they’re saving for college, and let them know you want to help.
- If the parents haven’t opened a 529 plan yet, perhaps you can help them research and choose a plan. Young parents are busy and often put off opening a plan if they haven’t had time to do the research.
- There are many reasons you might want to open your own 529 plan for a grandchild. If so, let the parents know your intention and how much you hope to set aside.
- If you’re open to making gift contributions to the parent’s 529 account, let them know that too. Ask them for a link to make gifts directly to the account, and discuss how often you’d like to contribute.
- When birthdays, holidays or other special occasions approach, ask for gift suggestions and remind them that you’re interested in contributing to your grandchild’s 529 plan accounts.
Other Gifters
Don’t be shy about asking for gift suggestions, and if college savings doesn’t come up, ask about it.
- Let the parents in your life know that you want to provide a gift that will last, and ask if they have a 529 account.
- If they haven’t opened one yet, you could encourage them to start and make one of the first contributions!
Conclusion
Family and friends often want to give meaningful and long-lasting gifts on special occasions, and a contribution to a 529 college savings plan can be a perfect way to do that. Having more open discussions about college savings goals among parents, grandparents and other gift givers can be a great way to encourage college savings gifts and to make it part of their gifting culture.
Methodology
The survey was conducted online by Saving For College from October 18th to October 30th, 2024 using the Alchemer platform. Respondents were recruited from the Saving For College email subscriber list and on the savingforcollege.com website. Of the 870 respondents who completed the survey, 69% were parents and 31% were grandparents.
