While slightly more than one-third (34%) of those already saving some money for college expenses identify such savings as their most important financial effort, nearly nine in 10 (85%) rank college savings in the top three reasons to save, new research from Fidelity Investments shows.
A similar proportion (88%) of current college savers say they intend to divert as much or more of 2014 income as they did last year to future school expenses, with 60% saying they intend to save more. Fidelity also finds that most parents have plans to save a fixed monthly amount during 2014, at an average of $405 per month.
One upshot for financial advisers and human resource professionals alike is the growing popularity of education expense-related benefits, such as qualified 529 college savings plans, through which earnings can be used free of federal income tax for qualified higher education expenses like tuition, room and board, and books.
Fidelity finds that only about half of parents who report actively saving for college expenses utilize a 529 product. But among the half that does, nearly all (93%) intend to contribute at least as much as they did in 2013.
Most parents (81%) say they intend to save a portion of monthly income. Other popular strategies used by active college savers include diverting part or all of 2013 tax refund monies (37%), earmarking a portion of a bonus or raise (36%), and reallocating funds previously allotted to day care or after school expenses (24%).
Another interesting result from the Fidelity survey is that parents aren’t working alone in saving for their kids’ education costs. Nearly four in 10 families (37%) say they will save a portion of monetary gifts their children may receive throughout the year for birthdays and other holidays. Half of parents surveyed say that family and friends have already contributed to their child’s college savings fund. Grandparents, in particular, are playing an important role, with 41% contributing.
Fidelity also asked parents to share their “to-do” lists for college savings in the 2014. The most common goals for 2014 are ranked as follows:
- Talk to children about how much college costs and how their family will pay for it (58%);
- Research scholarships and grants to help offset costs (53%);
- Consider talking to a financial planning expert for help (48%);
- Learn more about how the financial aid process works (39%); and
- Ask their children to save some of their own earnings (30%).
Fidelity says it has a host of resources that can help working parents to set and stick to a college savings plan. The firm offers a free 2014 College Savings Tips Calendar, providing a monthly outline of suggested strategies to help make college planning a year-long commitment.
Fidelity’s College Savings Resource Center offers online planning tools and calculators to help families engaged in the college savings process, and also includes a broad overview of savings options and strategies, and guides to search and apply for financial aid and scholarships.