Gen Y parents plan to save more for kids’ college

27 Sep 2015 | Author: | No comments yet »

Millennials are better at parenting than you are.

More millennial parents are saving more for their kids to go to college than Generation X parents are, according to Fidelity Investment’s 9th annual College Savings Indicator, a nationwide survey of 2,470 parents (with a household income $30,000 and up) with children aged 18 and younger who are expected to attend college.

Even with these changes, 55% of millennials in the current study felt they were not on target in their college savings efforts, an indication additional guidance and education were needed, Fidelity said. What’s more, millennial parents’ college savings behaviors hold true even when you compare their actions at ages 30 to 34 to when Gen Xers were that age in 2007. Furthermore, many millennials graduated with a lot of student debt (the Financial Finesse survey showed that the average student loan debt burden for people in their 20s is up 60% since 2005) – and thus may be more inclined to help their kids avoid this fate.

A few factors are likely contributing to these positive moves by millennials, says Keith Bernhardt, Fidelity’s vice president of retirement and college products. “For a good chunk of their adult life, they experienced the financial crisis,” he points out — which may have provided them with hard lessons about the importance of saving. The higher rates of education may explain why these parents are so gung-ho about helping their kids pay for college: these parents understand the benefit. Other surveys also show that millennials tend to be bigger savers than other generations: A Bankrate survey released this year found that more than half of millennials were saving at least 5% of their income — more than any other age group; and a survey this year from Financial Finesse, which administers financial wellness programs for companies, found that 72% of millennials (vs. 68% of Generation X ) spend less than they take in each month.

While these goals are worthwhile, some (like paying for the entirety of college, which nearly half of millennial parents say they want to do) are also “ambitious,” says Bernhardt — and if this group hits more bumps along the road — as is likely as you age — many members may have to reconsider goals like this. That confirms the mid-year report from the College Savings Plan Network, which found that the total investment by Americans families in 529 plans in the first half of 2015 reached a record $US258.2 billion, up 5.6 per cent from the previous year. Among all parents surveyed, 62% were saving strategically by developing financial plans, up from 59% in last year’s study, and 39% were using tax-advantaged 529 college savings plans, up from 32% in 2014.

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