Families want details on how much to save for college

Financial planners can help parents decide what they can afford to save and spend

Aug 25, 2016 @ 12:01 am

By Liz Skinner

Families want more specific recommendations about how much they need save to cover the cost of college for their children, as most are on track to come up short of their goals by the time their kids head off to school.

Only about 29% of families are saving enough to reach their college funding targets, according to a new Fidelity survey of 2,196 parents who have children expected to attend college.

Seven out of 10 of these families would like to receive more precise counsel on how much they should save to get each of their kids through school, the survey, released on Thursday, found.

(More: Financial advisers help clients graduate from student debt)

That includes details such as whether they should aim to save enough to cover half or the full cost for each child, or whether they should plan for their kids to attend a state university instead of a private college, said Matt Golden, vice president of Fidelity Institutional Asset Management.

Answers to these questions, of course, will depend on the family's own particular financial situation.

“College savings is an area that cries out for planning,” Mr. Golden said. “There's a need for guidance at the individual level that advisers are in the best position to provide.”

(More: Direct-sold 529 college savings plans grew faster than adviser-sold plans in 2015 )

About 47% of parents said they don't understand the best way to invest their college savings, the survey said.

The good news is that more families are saving for college than nearly a decade ago.

About 72% are saving funds to pay for higher education costs, up from 58% of families that reported such saving in Fidelity's first study in 2007. About 42% of families have a 529 college savings account, up from 26% in the first study.

(More: More Americans today are fuzzy on what 529 college savings plans do)

Parents who are working with financial advisers are more likely to own the tax-advantaged 529 plans, Mr. Golden said. And those who have opened 529 plans saved a median of $3,500 last year, compared to $3,000 for all families, the survey found.

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