For the first time in recent years, parents ranked saving for college as their top savings priority—even surpassing retirement, according to new data from Fidelity Investments’ 2022 College Savings Indicator Study, released today.
Twenty-seven percent of respondents cited saving for college as their top savings priority in the survey, while 22% citing saving for retirement and 19% said building an emergency fund was their top priority.
The study found most parents are concerned about inflation and the rising cost of college, however 81% feel college is still worth the cost. Even so, 29% aren’t sure what that cost will be by the time their child enrolls and six in 10 use “their own best guess” to estimate college costs.
And another cause for concern is the study found while parents hope to pay for 69% of their child’s education (up from 65% in 2020), they are only on track to cover 27% of anticipated college costs, a drop from recent years (33% in 2020).
“With high inflation and market uncertainties, meeting day-to-day financial needs is harder than ever for many families, making future costs such as college, much more challenging,” said Rita Assaf, vice president of Retirement and College at Fidelity Investments. “For those with student debt, there is some relief in sight with the recently announced federal student loan debt forgiveness program. However, planning ahead for future college costs to avoid some of the debt will go a long way. Parents would never recommend their kids not plan for a test and simply guess at the answers as the strategy is unlikely to be very successful. Similarly, parents can’t afford to not be prepared when it comes to saving for the rising cost of college.”
The study, which has been conducted regularly since 2007, finds that while parents are less concerned with COVID-19’s impact on their savings strategy than in 2020, there’s a new wave of concern keeping them up at night: inflation and market volatility. The study found 81% are concerned about the recent market volatility’s impact on their college savings, up from 74% in 2020.
Of parents who plan on decreasing their savings this year, four in 10 attribute market volatility as their primary source of concern. While nearly all parents are concerned about inflation and the rising costs of college, encouragingly, most (83%) are still planning to either increase or stay the course with their savings strategy this year.
The study also reveals more than half of parents (54%) believe the United States will one day offer tuition-free college. Furthermore, more than a third (36%) claim if that became the case, they would continue to save for their child’s education all the same—indicating some parents are uncertain of the likelihood that such benefits would cover all the costs (e.g., books, housing, etc.) or will come with limitations for those wanting to attend private colleges, pursue advanced degrees or career paths.
In all, 76% of parents have started saving, compared to the 58% in 2007, the first year of the study.
Student loan debt struggle
Concerns about student loan debt continue to rise as more and more parents agree it motivates them to save for their child’s future college costs (79% in this year’s study, up from 65% in 2018).
For those parents still paying off their own student loan debt (22% of respondents), nearly nine in 10 (88%) say once they’re finished paying back their own student loans, that money will be used for their child’s college savings. In fact, nearly one-third (30%) of them admit to not even having started saving for their child’s education at all.
The federal emergency relief repayment and interest freeze set to expire in December 2022 has provided help to parents, with nearly half (49%) reporting they are not making any payments towards those loans.
Fidelity notes that simply starting the conversation within a family can help. The study found that 86% of parents who have talked to their child have started saving, compared to 63% for those who have not had a conversation.
Furthermore, 45% of parents who talked to their child about saving opened a 529 college savings account, compared to the 32% who had not. This is important, because the data suggest that not only do parents with a 529 have higher expectations for how much they plan to save, they’re also more likely to meet those savings goals.
Parents expect their children to have saved a median of $5,000 by the time they graduate high school. Even so, 45% of parents have not yet talked to their children about saving and paying for college.
SEE ALSO:
• Biden Cancels $10,000 in Student Debt, Extends Repayment Pause
• Surprising Findings on 401k Participant Student Loan Debt
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
