HomePersonal FinanceWhy Parents Struggle to Save for College for Their Children

Why Parents Struggle to Save for College for Their Children

All parents want to send their kids to college. Unfortunately, more and more parents are finding it difficult to save for college in these days of rising tuition rates and a shaky economy.

A generation ago parents put their child’s college funding at the top of the priority list, but now many parents are being forced to postpone their plans or forego saving for college altogether. A number of factors are contributing to this shift, including unemployment, higher tuition rates and the urgent need to save for retirement.

Unemployment and Lower Wages

The national unemployment rate currently stands at 9.2 percent, according to the U.S. Bureau of Labor Statistics. The actual number may be much higher, as many people do not qualify for unemployment and others have exhausted their benefits. This number also does not take into account the vast number of formerly full-time workers who are being forced to work part-time. If these were the only problems, the situation would be bad enough, but unfortunately a lot of consumers have also had to take pay cuts to retain their jobs or find another position.

All of this puts a crimp in consumer spending and especially in saving. No one is going to be saving for college when they are depending on unemployment benefits to pay the mortgage!

Higher Tuition Rates

It is just a fact that college tuition is increasing much faster than inflation. The college financial aid website reports that the average increase in tuition is now eight percent a year. This means that the cost of a college degree doubles every nine years!

This massive increase has made many parents stop trying to save for college because they feel they will not be able to afford it anyway. After all, if a child born tomorrow will have to pay four times the current tuition rate, he or she will probably have to depend on another source of college funding anyway.

Retirement Savings

Parents are feeling the pinch from another location as well, as it is becoming ever more expensive to retire. There was a time when one million dollars was considered a good goal to strive for, but now advisors are warning people that they may need to save two or three times that if they want to have a comfortable retirement.

Everyone wants to retire, and no one wants to live on Social Security benefits that may be well under $1000 a month. The net result is that many parents are putting money into their 401(k)s instead of saving for college.



  1. The cost of college is unbelievable! My daughter will head off to school next year, and as of now, I am still uncertain as to where the money is going to come from. I’ve got some saved, but honestly, nowhere near enough. I’m crunching numbers, but the end result isn’t pretty!

    • Where is she going to school? Have you guys started the FAFSA process? Is she aware that she is going to have to take loans?

      • We’ll start the FAFSA process after I file my 2011 tax return. She’ll go to a small in-state school. And yes, we’ve discussed the student loans and the cost and how we want to avoid those as much as possible. I think I’m frustrated because my education was 100% paid for by my parents, and I know I can’t manage the same. Its a bit disheartening. But we will make the best of it!

  2. Very good points, all are quiet true. How about parents do some extra work/overtime to save for college? Is it the mentality that children, once they achieve adulthood, are on their own?
    Interestingly I also wrote on the same subject today 🙂

    • I think it is a Family to Family discussion. I know some people that are done with parental help at 18 and then there are some people that I know still being helped into their 30s

  3. Here in Canada we can contributed to a RESP (Registered Education Savings Plan) where we can contribute up to $2500 per year to the plan (in many different types of investment vehicles) and the government automatically matches $500 – or a 20% ROI. The investments also grow – the magic of compound interest. This is how we plan to help our kids through college. Lil’ SPF should have a sizeable sum in 17-18 years.

    • Us in the U.S. have an equivalent called the 529. While we don’t get a match some states get a state income tax deduction.

  4. I think it is always a struggle, but unemployment is making it impossible. If you plan early the current temporary situation has less impact. Community college may be the least expensive answer and finish at a good 4 year school.

  5. My mom jokes, “Even if you are thinking about having kids, you should already be saving for their college fund!” While I’d like to believe I’ll be able to pay for my kids to go to school, I think making sure I have enough for retirement is a bigger priority. I don’t want to be a burden on them in the future.

  6. You make some great points about the reasons parents don’t save for their kids college career.

    Allow me to add one more thing to the list, THEY DON’T WANT TO!

    Don’t get me wrong, not that they don’t want their kids to go to college, but they don’t want to pay for it. I know my wife and I have made the decision that we are NOT paying for college for our children. They will have to do that on their own.

    They need to get loans or scholarships. We are putting our money into their education, not with just swanky schools that people talk about, but their actual learning so they can dominate these standardized test that determine if your kids will get a scholarship or not.

    I’m not afraid to say it, with the excellent grades, test scores, and the fact that we are African American that they will get a scholarship to any college they want to.

    Right now, we are in talks about Stanford and MIT, which my oldest wants to attend. He is 11 years old and in the 8th grade, but we are prepping now.

    Let’s see how it goes!

    • I completely think it is ok to make that decision as long as your children KNOW about it. I think too many times it isn’t talked about and then boom the kids are floored

  7. Great post Evan. We’re holding back on starting our daughter’s college fund until we finish paying our last student loan.

    Our hope is to finish before she’s 2 and take that money and direct it towards her.

    • Great idea! I would love to do that too but I have about 60K of law school loans left hahahah will have to start WAY before that

  8. Ahh, college, one of the great US transfer of wealth schemes. So, I make just enough that we’ll probably never qualify for any actual grants or aid. So, for 20 years, I’ve be socking away $1500/month to put the three kids through at least a state school equivalent and perhaps in the later years I will have saved enough for a higher tier college. I’m hoping to at least give them a full ride undergrad. Fancy private school or grad school? They can pitch in.

    • That is really generous of you – does PA get an income tax deduction for the contributions? In New York it is 10K for a married couple

  9. Let me address the reason of “Retirement Savings”. This is a big problem.

    While saving for retirement is good, people are going on with it the wrong way.

    When people invest in a 401k, that money only has 1 purpose: retirement. If you take that money out beforehand, you get taxed and penalized.

    Even if you invest in a 529 plan for college tuition, that money is still stuck doing one thing: saving up for college. That money can only go towards college.

    When we save money, whether it be for college or retirement, we should look for a strategy that is beyond its purpose. Otherwise, you lose the flexibility. You want a strategy that you can use for retirement, college, and huge unexpected expenses.

    And, you want a strategy that doesn’t penalize you for using “your own money”!

    These are the reasons why I don’t invest in a 529 plan and even a 401k.

    In fact, I cashed out my 401k plan…because it was just costing me too much money.

  10. There are alternatives like going to a community college for the first 2 years, or making sure your child keeps their grades up and applies for scholarships and grants. There’s also nothing that states parents have to pay for their kid’s college tuition. Plenty of students find ways to fund it themselves. As long as they understand student loans and not take out more than they need!

    • As long as it is discussed I think any decision is an okay one. The Wife’s undergrad education and my undergrad education were paid for completely by our parents…so I am pretty sure we want to pay it forward

  11. That’s one reason why I’m happy with one kid. I also think community college then transfer is a good option if you don’t have a lot of saving. I met my closest friends during my freshman year though so if I could afford it, I would send the kid to a 4 years college right off.

  12. You know, I want my kids to get a good education but I don’t know where this idea came from that parents have to pay for their kids college.I don’t know if it’s just me but when I was growing up, my parents never mentioned anything about paying my college, I never expected it and I didn’t get the help. I got loans and worked through college like everyone else.I’m continuing that tradition because I feel like my kids will get more out of college if they are paying for it themselves. Money is worth a lot more when you put your sweat and blood into making it and that’s the same with education.Am I out in left field here?

    • I don’t think you are out of left field at all, I think what happened was that it became the norm to go to college and the carrot so to speak was a parent paying for it.

  13. Our daughter is currently a sophomore at a public, in state university. After scholarships, her education is costing us about $15k per year. We’re paying for it out of current earnings because we don’t want for her or us to have to take out student loans.

    It’s worth noting that it’s harder for kids to pay their own way through college with costs rising as fast as they are. Options like community college certainly can make that more do-able.

  14. My parents didn’t help me pay for school. I had to take out student loans on my own. They couldn’t even co sign for me either because they had gone into debt for helping pay my older sister’s tuition.


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