Parents are saving more than ever for college — and it's still not enough
College tuition continues to rise, putting increasing pressure on parents hoping to give their children a hand in paying for school. And more parents than ever are stepping up.
According to Fidelity's recently released 10-Year College Progress Report, 72% of parents reported saving for college this year —a record high — compared to 58% in 2007. The number of parents taking advantage of a dedicated college savings plan, such as a 529 plan, is also on the rise, up 62% since 2007.
However, it's still not enough.
"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, noted in the study.
Fidelity found that on average parents aim to cover 70% of their kids' college costs, a spike from the 57% reported in 2012. But while noble, these bigger goals mean parents need to ramp up their savings efforts significantly — often easier said than done.
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On average, families have increased their savings from $1,500 per year in 2007 to $3,000 in 2016, but nearly half admit they still feel off-course to reach their target amount. Parents with kids in tenth grade or higher also admitted they wish they had saved more early on to give their investment time to grow.
They're on to something. Putting away just $50 a month from the time a child is an infant until they're 18 adds up to a lump sum of $10,800. And investing that money into an account with a 6% rate of return nearly doubles it, leaving parents with around $19,000 after 18 years.
Overall, parents are making substantial progress when it comes to saving for college. But if they want to hit that 70% goal by the time their child packs up for freshman year, they need to double down on their efforts.