INDIANAPOLIS – A new study from CollegeBacker shows nearly half of Americans have withdrawn money from their children’s savings account of 529 throughout the pandemic.
CollegeBacker, a tool that helps people set up college savings accounts, found about 46% of parents paused or reduced their contributions or planned to take money out of such accounts, because they had other expenses they needed to cover.
Analysts say it’s understandable that people would need the extra funding. Millions of Americans were laid off or furloughed when states shut down during the health crisis. Yet, they say, scraping savings accounts could affect whether people’s kids end up going to college at all.
“The studies are showing the more you save for college, early, the larger the chances are that your kids will go to college. Even a small amount of money saved, say several hundred dollars, has a big impact,” James Ryan, CollegeBacker, said.
Ryan said only 50 percent of the country is putting money aside for their kid’s college. Only half of those parents are using a 529 account, which is specifically designed to save for secondary education. A 529 is tax free and grows with the stock market. Ryan said Indiana also offers tax incentives for those with such accounts.