BOSTON–More parents are saving for their kids' college education and are getting more disciplined about it, but they are still not saving enough, according to a new analysis.
In its annual College Savings Study, Fidelity Investments said it found that many of today's parents, many of whom have grappled with their own student debt, hope to foot more of the bill for their college-bound kids, up to about 70% of it, up from 57% four years ago, the survey found. Forty-three percent said they hope to cover all college costs.
But despite those plans, most won’t be able to foot as much of the bill as they’d like, Fidelity reported. Its findings are based on a
national sample of 2,196 families with children who are 18 years and younger and whose parents expect them to go to college. The average household income was $97,700; 71% of all the parents had graduated from college.
Among the findings:
- Just 29% will be in position to cover college costs by the time their child heads to school. That figure is up from 27% a year ago.
- Fifty-two percent of parents said that when they look back 10 years, they think they could have saved more. Half of those who said they could have saved more pegged the amount at $50 or more per month; 26% said $250 or more a month. The median answer was $200 a month.
- Fidelity said it ran the numbers on what those additional savings could have added up to over time and estimates $50-per-month camp could have accumulated another $8,200 in 10 years and $19,400 over 18 years. If a family had saved an extra $200 a month for 10 years, its savings could have swelled by $32,776 and grown to $77,500 over 18 years. (Fidelity said it used a 6% annual rate of return; the additional savings amount is not inflation-adjusted.)
- When each generation is broken down by how much of their kids' college its members plan to pay for, the Millennial generation has the largest share of parents—52%—who want to cover all the costs. Of Gen Xers, 38% said they plan to cover all college costs; 26% of Baby Boomers said the same.
- Fifty-eight percent of all respondents said they want their kids to graduate with no debt. When asked how much debt they thought acceptable for their child to have on graduating, Millennial parents gave the lowest amount—$19,800.
- Three-quarters of parents said they are thinking about having a nonworking spouse return to work or having a child work while in school.
- More parents are also using college tax-advantaged 529 savings plans. Forty-one percent of families surveyed invested in a 529 plan; the same percentage works with a financial professional.
- Nearly two-thirds of parents said they have a financial plan that's helping them with college savings, up from 62% last year. That plan might also be getting them to focus on retirement savings, since 27% of parents named that as their No. 1 savings priority (college followed at 21%).