According to a new Fidelity report on close to 1,800 parents of children age 18 and younger, surveyed between June 5 and July 2, 78% are saving for their children’s college education, up from 70% in 2018, though 71% are concerned about the pandemic’s impact on those savings.
Almost all (77%) of the parents surveyed agree that a college education is worth the cost, but 36% said they will prefer a less expensive school if distance learning, which predominates on and off today’s college campuses, becomes more common.
“The pandemic college experience — which may mean learning virtually — is likely not what students and parents initially planned for when they began saving,” said Melissa Ridolfi, vice president of retirement and college leadership at Fidelity Investments, in a statement. ”While this new environment has many reconsidering where and how they use college savings, parents continue to recognize the value of a college education.”
Close to half the parents surveyed (48%) have opened a 529 savings plan, which is an all-time high for the survey series, and almost two-thirds of families working with financial advisors have 529 college savings plans. These plans are a particularly attractive way to save for college because their assets grow tax free, and withdrawals from the plans are tax free so long as the funds are used for qualified education expenses. In addition, some states allow state tax deductions for deposits.
Despite the growing popularity of 529 plans, families aren’t saving enough to achieve their college savings goal, according to the survey.