You’d have to be living on another planet to not know about the skyrocketing costs of a college education and the trillion dollar student debt that is looming over college students in America. Now we even hear respected experts, like former Treasure Secretary, Robert Reich, talk about how worthless a college education is today. It’s enough to spin your head right around.
We grandparents (70 million strong) are the richest segment of the American population and we’re poised and motivated to do anything that will help make our grandchildren’s lives better.
The first step is to start learning about what’s available. Take a peek at this infographic from Fidelity Investments.
According to new research from Fidelity Investments®, more than half (53 percent) of grandparents are saving or plan to start saving to help pay for college costs, and a full 90 percent report they would be likely, if asked, to make a contribution to their grandchild’s college savings fund for special occasions in place of other gifts. Of grandparents already saving or planning to save, many expect to make significant contributions. When asked how much they anticipate contributing to college education funds of all their grandchildren, they report a median of $25,000, with 35 percent expecting to contribute $50,000 or more.
Fidelity’s 2014 Grandparents and College Savings Study finds that a majority of grandparents are taking part in planning for their grandchildren’s college career. In fact, 72 percent of grandparents think it’s important to help grandchildren pay for their college education. Among those who talk to their adult children about a grandchild’s college education, 59 percent give advice about saving for college at least once a year.
Why this feeling of responsibility? The study indicates that many grandparents value a college education and consider it an important component to providing young people with the best opportunity to succeed. They also recognize that as the cost of college continues to rise, parents and grandchildren face a big challenge in saving enough to cover costs, and that without help their grandchildren could face a significant financial burden after they graduate. In fact, more than a third (37 percent) say they worry about their grandchild’s ability to attend college without incurring significant student loan debt.
“For many families, saving for college has become a team effort, and many grandparents aren’t content to sit on the sidelines,” said Keith Bernhardt, vice president of college planning at Fidelity. “Contributions from grandparents – big or small – can add up over time and potentially open up a grandchild’s opportunities when making college decisions. Ongoing communication between parents and grandparents can help when determining how to grow their savings, as well as how to best leverage those savings to pay for college when the time comes.”
Older Generation Well-Schooled–and Engaged–in Today’s College Realities
According to the study, 52 percent of grandparents are familiar with 529 college savings plans. Grandparents like the fact that 529 plans are dedicated solely to college savings, and that earnings can be withdrawn federal income tax-free for qualified education expenses. Many also appreciate that funds can be controlled until the time is right to share them with their children, grandchildren or college of choice.
Fidelity’s business data shows a growing interest in 529 college savings plans by grandparents. The firm has seen a 12 percent increase in the number of new retail 529 accounts opened by grandparents during the first four months of 2014 (January through April), compared to the same period last year. Overall, approximately 15 percent of Fidelity-managed retail 529 accounts are owned by grandparents.
- Many grandparents are regular contributors: One key savings strategy often suggested is to automate contributions so they become habitual, giving savings time to grow. Grandparents are listening. Of grandparents already saving for a grandchild’s college education, more than a third (35 percent) contribute on a monthly basis. A third (35 percent) contribute as part of gifts on special occasions such as birthdays and other holidays.
- Grandparents often join the planning conversation: In many families, grandparents are taking part in college planning discussions. Sixty-nine percent of grandparents acknowledge talking to their children about college issues, including the total cost of college and how the family will pay for it. More than half (53 percent) talk directly with their grandchildren as well.
- Investing in the future: Forty-seven percent of grandparents are including or thinking about including college savings for their grandchildren in their long-term financial or estate plans.