With the markets tumbling, a recession on the horizon and people growing increasingly fearful of losing their jobs, more parents are delaying saving for their childrens college education, Investment News reports. Sales of 529 plans fell 33% in the first six months of the year to $6.3 billion, down from $9.8 billion a year earlier.
Investment management firms are assuming that families are shelving their college savings accounts because their finances are being stretched. College savings are taking a hit, said Joe Hurley, president and chief executive officer of Savingforcollege.com.
Peter Mazareas, vice chairman of the College Savings Foundation and CEO of Strategic Advancement Group, agreed: People simply dont have the money to save, and theyre falling behind. Its not a good situation.
With forecasts for economic growth to deteriorate into 2009, many believe 529 sales could fall even further.
As it is, parents are expected to be able to cover only 21% of their childrens college education, down from 24% in 2007, according to a survey of 3,000 parents by Fidelity Investments. And a third of those polled said they have either already decreased their 529 contributions or plan to do so.
Separately, the College Savings Foundation found in a survey of its own that the percentage of parents who have saved nothing for their childrens education has increased from 27% to 43% in 2008.
Unlike past market events like the tech bubble and the savings and loan crisis, todays situation has much broader implications because just about every sector and asset class has been affected, and its dipping into our retirement and college savings accounts, said Illinois State Treasurer Alexi Giannoulias.