Advisors seeking millennial clients, take note: Young parents are more ambitious than older ones when it comes for saving for their children’s college education. But many are falling short of their goals, and they are open to advice.
In an era when many American families are weighed down by student loan debt, an all-time high of 69% of families are saving for college, Fidelity Investments reported Thursday. Millennial parents are particularly ambitious; nearly half want to pay their children’s full tuition. But most parents aren’t on track to accomplish that.
Fidelity’s ninth annual College Savings Indicator Study showed that millennial parents were adopting smart college savings habits at a higher rate than older parents.
Among all parents surveyed, 62% were saving strategically by developing financial plans, up from 59% in last year’s study, and 39% were using tax-advantaged 529 college savings plans, up from 32% in 2014.
Moreover, 66% of parents said they intended to take on a larger portion of their children’s anticipated college costs, compared with 57% who said this in 2012.
Good intentions aside, the study found that families were going to have saved just 27% of their college funding goals by the time the bills started coming in.
This means parents still have work to do on the savings front, and professional financial advice can be a significant factor in this, Fidelity said.
“It is critical that parents of all ages establish college savings goals that are practical for their family’s individual circumstances, and get the guidance they need to ensure they have an effective savings strategy to help them achieve those goals,” Keith Bernhardt, Fidelity’s vice president of retirement and college products, said in a statement.
Data for the study were collected by Boston Research Technologies, an independent research firm, through an online survey between June 5 and July 6 from 2,470 parents nationwide with children age 18 and younger who were expected to attend college. Survey respondents had household incomes of $30,000 a year or more, and were the financial decision makers in their household.
Respondents in the millennial generation planned to defray 74% of their children’s college costs, a more ambitious goal than that of older generations. In addition, 46% said they intended to pay their children’s full tuition bill.
What’s on millennial parents’ mind when looking forward to their children’s college years?