Parents of college-bound children who work with a financial advisor are slightly more prepared to pay for the growing expense of higher education than are those parents who do not rely on the advise of a planner, but there is a lot of room for enlightening parents to the reality of college costs and how they can effectively pay for it, according to a study by Fidelity Investments dubbed the College Savings Indicator.
The Fidelity survey tabulates the current college savings status and attitudes of 2,200 families with children 18 years of age or younger who anticipate attending some level of higher education. The cost is anticipated to be an average of $100,000 for tuition, fees, room and board, and is growing at 5 percent a year, Fidelity calculates.
Of those surveyed, 58% have started saving for college expenses, but half did not start until their child was 4-years-old, raising the monthly savings needed from $245 to $420. Only 21% of the families work with an advisor, and only half of those working with a financial advisor use a tax-advantaged savings plan such as a 529 account, says Martha B. Willis, executive vice president at Fidelity Investments Institutional Services. Further, only 26% of all parents who are saving for college use a 529 account.
"This is a real opportunity for advisors to be more proactive in promoting these tax advantaged accounts and an opportunity to build their business," Willis says.
"If the government is going to give you a tax break, you should take advantage of it," advises Carolyn Clancy, executive vice president at Fidelity Personal and Workplace Investing. "Some 21% of the people saving for college did not even know about 529 accounts and 42 percent said they prefer saving in a general savings account that can be tapped for other needs."