(MoneyWatch) A small percentage of American families are saving for college through so-called, and the parents who are embracing these accounts tend to be wealthier.
According to a new study by the U.S. Government Accountability Office, less than 3 percent of families are saving for college through 529 accounts or Coverdell Education Savings Accounts, which provides owners with generous tax benefits.
Of the 25 percent of families that expect major education expenses in the next five to 10 years, roughly seven percent of them possess 529 plans or Coverdell Education Savings Accounts. What's more, of the 18 percent of families who reported that saving for an education was a priority, only 9 percent have one of these college accounts, according to the GAO report, which drew on data from the 2010 Survey of Consumer Finances and other sources.
The GAO cites Sallie Mae survey that suggests that most families who are saving for college are doing so in general savings accounts or certificates of deposits.
Parents save an average of $14,700 inor Coverdell accounts.
Paul Curley, director of college savings research with the Financial Research Corp., notes that usage of 529 plans appears more widespread if you eliminate families that don't have children under the age of 18. Fifteen percent of families with these younger children save through 529 plans, and the number would rise further if the cohort only included parents that expect their children to attend college.
According to the GAO, families that save for college through
The GAO estimates that the median financial asset value for college account owners is roughly $413,500. This is about 25 times what it is for other families. Ninety-four percent of parents saving through these college plans have retirement accounts, while just 49 percent of other families have retirement assets.
What does it mean that wealthier families are far more likely to take advantage of a 529 plan? Among other things, that the financial industry is more interested in cultivating high net worth customers than trying to persuade Americans to save for college.