A new survey from Credit Karma shows that while many parents are thinking about their children’s financial future, few are using the best accounts designed for education costs.

According to the survey, 66% of current and future parents say they’re saving for their child’s future. But just 24% are using a 529 plan, a tax-advantaged account created specifically to help families set money aside for education.

Instead, most savers are relying on basic savings accounts. These accounts don’t grow tax-free, and the interest earned doesn’t usually grow enough over time to help pay for school. That decision could end up costing families in missed growth and lost tax benefits.

Awareness Gap Holds Back 529 Plan Use

The biggest hurdle isn’t distrust or dislike of 529 plans. It’s lack of awareness.

Among those not using or considering a 529 plan, 43% said they either hadn’t heard of it or didn’t know what it was. Another 18% didn’t realize it could be used for more than college, such as K-12 school, apprenticeship programs, and even student loan repayment.

Some parents also expressed concern about how a 529 might affect financial aid eligibility. About 14% cited this as a reason for avoiding the account, despite financial aid formulas treating 529 savings more favorably than other assets, especially when owned by a parent. Even the new Trump accounts won’t be treated as well as the 529 plan.

There’s also a perception that 529 plans are restrictive. 17% of those avoiding them said they preferred more flexible investments, and 15% felt the rules and penalties were too limiting.

Uncertainty About College Impacts Savings

Beyond the technical details, broader skepticism about the future of college is also shaping decisions.

18% of parents who passed on a 529 plan cited uncertainty about the value of college. 16% pointed to concerns about student debt. Another 13% said doubts about the job market after graduation made them hesitant to lock in money for higher education.

These doubts haven’t stopped parents from saving in general, but they have shifted how they think about the future. Many are building contingency plans instead of committing to education-specific savings and investments.

Plan B: Scholarships, Loans, And Delayed Retirement

Among parents not using 529 plans, many cite fallback strategies to pay for college.

More than one-third (37%) plan to help their child apply for scholarships or grants. Another 29% expect their children to begin at a community college. While community college is free in many states, relying on grants and scholarships is risky. In our parent groups, we see many families shocked by how few scholarships their children receive. Only about 1% of students get a full-ride scholarship to college.

Some are preparing to rely on loans: 22% said they’d have their child borrow, and 19% said they would borrow themselves.

Others may turn to their own financial cushions. About 31% plan to dip into general savings or investment accounts, and 14% said they might use home equity to pay for college. 13% are even willing to scale back retirement savings to cover college costs.

One-Third Of Families Aren’t Saving At All

Not every parent is saving. The survey found that 34% of parents aren’t putting aside anything for their child’s future. Most (67%) said it’s because they simply can’t afford to.

Some said job loss or unstable income played a role (22%). Others were caring for aging family members or focusing on other obligations. A quarter of respondents said it just felt too early to start saving. One in five hadn’t thought about it at all.

These numbers underline how financial stress, confusion about available options, and doubts about higher education are influencing how families prepare (or don’t) for college.

Don’t Miss These Other Stories: