Parents plan to cover 64% of their children’s college costs, Fidelity’s eighth annual College Savings Indicator Study found. Unfortunately, the report also found parents are on track to meet just 28% of their college savings goal.
Furthermore, most parents agreed that their children should shoulder some of the cost of their own education, but many haven’t spoken with them about those expectations. Just 57% of parents with children 13 or older have talked to them about how to pay for school.
“Parents are taking a team approach to college funding, which is perhaps a more practical way to look at it, since it can be valuable for kids to have some ‘skin in the game’ when it comes to their education,” Keith Bernhardt, vice president of college planning at Fidelity, said in a statement.
A third of parents are adding an advisor to their team, up from 21% when Fidelity first started surveying investors about college savings. Of those, the majority are looking for advice on how to pay for college, but 36% are also looking to their advisor to help determine how much of their children’s college costs they should pay for.
“These findings indicate that even though families that use advisors may have the means to pay for a larger share of their children’s college education, they still want their child to value that education by understanding and contributing to the cost,” Matt Golden, vice president of college savings for Fidelity Financial Advisors Solutions, said in a statement.
Fidelity broke out the benefits advisors provide their clients regarding college savings. Less than half of parents without an advisor have a plan for reaching their college savings goal, compared with 82% of parents with an advisor. Less than a quarter of advisor-less parents are using dedicated education savings products like 529 plans, compared with 57% of those with an advisor.
Eleven percent of parents who work with a financial professional have actually had their advisor meet with their children to talk about college costs. Forty-three percent used advisor-provided resources to facilitate a conversation about costs.
A study by Allianz found many parents, especially single parents, are choosing to save for college over retirement, but Fidelity found saving for college was respondents’ No. 2 priority this year. Although 70% or respondents said they were saving monthly, with a median contribution of $250, many are still off track, according to Fidelity.
The report identified several ways parents can increase savings. First, they need to formalize a plan. Fidelity found 52% of parents with a plan felt on track, compared with 16% of those without one.
Additionally, investing in a 529 plan can be helpful. Overwhelmingly, parents who invest in a dedicated college savings plan said it helped them save and stay on track (93%). Respondents said a dedicated product was helpful in keeping college savings and short-term goals separate.
Parents might have to get creative, too. One suggestion from Fidelity was to look for rewards credit cards either connected to a 529 plan or that earn cash back that can be set aside for college. The report found 24% of respondents are already doing this.
Or, the next time a family member asks what they should get their grandson or niece for their birthday, parents could suggest a contribution to a college fund. An earlier study by Fidelity found 90% of grandparents would likely do that instead of buying a gift.
Another way parents with young children can pad future college accounts is with the dollars they were putting toward day care or after-school care once their children age out of those programs. Fidelity found 56% of parents who are currently paying for some form of child care plan to redirect those funds to college accounts when the children are older.
Of course, parents’ financial education is important, too. About half of respondents said they needed more education when it came to saving for school. How to invest savings (50%) and which accounts were best to save in (49%) where their biggest concerns, and 48% weren’t sure where to go for advice.
Related on ThinkAdvisor: