Determinants of Parents' College Education Saving Decisions

Abstract

This study examines the factors associated with the decisions of U.S. households to save for the college education of their children using state-level data from the 2015 U.S. National Financial Capability Study. The results suggest that financially fragile households and those characterized by low income, low education, more children, no health insurance, and no homeownership are less likely to have college savings. Households who are willing to take financial risks and those with higher perceived financial knowledge are more likely to save for the college education of their children. Whereas bond- and loan-pricing literacy are the only components of financial literacy that are associated with a higher probability of college savings, the overall financial literacy score is associated with a lower likelihood of saving for college.