A survey conducted by Sallie Mae found that less than half (48%) of parents with one or more child under 18 are saving for college!
This compares to 62% of parents who were saving in 2009 and 51% as recently as last year and, is the first time a reading below 50% has been recorded (survey is 5-years old).
A startling fact is that of those parents who actually have saved the average amount put aside for college expenses is slightly more than $10,000.
Compare this to the fact that one-year at a state university will typically cost about $20,000 and private schools in the $30,000-$70,000 a year range.
Is this lack of savings a commentary on the economy meaning that monies are not available to save and instead are earmarked for basic living expenses?
Is it because parents are aware that loans are readily available so that saving for college is not necessary (although kids will then be saddled with an unmanageable amount of debt after graduation)?
Has the importance of a college education somehow been diminished?
Whatever the reason, consider that for those who do actually save less than 30% are using 529 plans that offer tax advantages and instead are using basic savings accounts.
Will this dearth of savings for higher education contribute to an even greater U.S. brain drain in the future?
But assuming for a second that some part of the 52% not saving for college may actually want to save brings us to the topic of…
Unintended Consequences of Quantitative Easing!
When I was first starting out and interest rates were at what some may have termed ‘normal’ levels there was an opportunity for savers to actually save while earning a reasonable return on their invested dollars.
Of course at this point the comparison will be made concerning real rate of return that’s nominal yields minus inflation.
Factoring that in I was still able to save for college in the 1990’s by purchasing municipal zero coupon bonds yielding above 5% to mature at the times that my kids would be entering college.
Today, because QE has pushed interest rates down and sustained them at such low levels, that same potential does not exist effectively pushing savers of all kinds (college, retirement, retirees, etc) out onto the risk curve.
At some point, whenever it is that the Fed decides to tighten and interest rates rise, that strategy may have extremely destructive consequences!
Michael Haltman, President of Hallmark Abstract Service, New York.
HAS is a provider of title insurance in New York State for residential and commercial real estate transactions.
And, for anyone either buying a property or refinancing, remember that although your attorney will likely recommend a title insurance provider you always have the right to choose your own (click here to learn more)!
If you have any questions you can reach Michael by email at email@example.com.
H/T New York PostGoogle+