Saving for college is at an all-time high, according to Fidelity Investments’ 10th Annual College Savings Indicator Study.
The study finds that 72% of American families are currently saving for their children’s higher education – a 24% increase since the first year the study was published in 2007.
This year an all-time high 41% of families report owning a 529 college savings account, up 62% from 2007.
The good news is that more parents than ever are saving; the bad news is that parents are on track to save only a portion of their college funding goal.
The study finds that parents plan to cover 70% of the total cost of college, up from 66% reported in 2015. However, they are on track to cover only 29% of that college funding goal by the time their child reaches college age, according to Fidelity.
“While families have adopted more active and effective savings habits over the past decade, this year’s study still finds that on average, parents are on track to reach just 29% of their college funding goal by the time their child heads to campus,” Keith Bernhardt, vice president of college planning at Fidelity, said in a statement. “Parents still need help identifying how to maximize opportunities to save while meeting other family financial demands, and how to invest that savings in order to help their college dollars grow.”
According to the study, 47% of parents say they don’t fully understand how to invest their college savings. And seven out of 10 parents surveyed want more specific recommendations on how much they should save for college.
This need for more education and guidance may be a contributing factor for more families actively seeking out college planning information over the last decade, including working with a financial professional.
In 2007, just 21% of parents reported working with a financial professional. Today, that percentage has nearly doubled to 41%.
Among families working with an advisor, 91% have started saving and 61% are investing in 529 college savings plans, according to the study.
The study finds that helping families engage grandparents and other family members in college planning, maximizing investment strategy and understanding efficient 529 withdrawals are growing areas of guidance advisors can provide.
Many parents (80%) also cite their own experiences with student loan debt as influencing their commitment to help pay for college and increasing their savings amount.
In 2007, families reported saving a median of $1,500 for college in the previous year; whereas in 2016, parents report saving a median of $3,000 last year. Parents saving in a 529 plan are contributing even more, with a median of $3,500 reported last year. Furthermore, among 529 plan owners, 45% have increased their contribution rate in the last 12 months.
Even with these increases in savings, the study finds that approximately half (49%) of parents say they still feel off-target in reaching their college savings goal.
The study was the result of an online survey of 2,196 parents nationwide with children age 18 and younger who are expected to attend college. The survey respondents had household incomes of $30,000 a year or more, and were the financial decision makers in their household.