According to Fidelity Investment’s 9th annual College Savings Indicator, more millennial parents are saving for their children’s college than Generation X parents. The College Savings Indicator is a nationwide survey of 2,470 parents with a household income of $30,000 or more who have children aged 18 and younger who are expected to attend college, says Catey Hill of MarketWatch.
There are reasons for these positive actions on the part of 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. Other surveys have shown that millennials are saving more than other generations. More than half are saving at least 5% of their income, according to a Bankrate survey published this year.
Another survey from Financial Finesse, an administrator of financial wellness programs for companies, showed that 72% of millennials spend less than they take in each month, while 68% of the Generation X demographic do the same. Many millennials graduated from college with plenty of student debt, which may make them more likely to want to help their kids avoid this problem.
“More than any other generation, millennials have experienced first-hand the balancing act of paying off student loans while striving to become financially independent, which has likely propelled many of them, as parents, to take action,” the Fidelity report revealed.
These are noble goals, but they are also “ambitious,” says Bernhardt, and may become difficult to reach as this group hits bumps along the way and ages. Also, focusing on college savings may be a bad thing, unless parents are on track to save for retirement. Kids can get a loan to pay for college, but parents cannot get a loan to pay for retirement.
Almost half of parents in their early thirties are planning to pay for college expenses for their children. In 2007, only 16% of parents in their early thirties said the same, according to Fidelity. Katie Lobosco of CNN says millennials have an average of $1,500 already saved for their kids college, which is $500 more than young parents had saved previously.
“Millennial parents are much more ambitious and optimistic about covering their children’s college costs, but they’re not ahead of the game,” said Keith Bernhardt, VP of retirement and college products at Fidelity.
Paying for higher education is not that simple, he adds. Will a child go to a four-year college; a public school; will he graduate on time? It’s hard to know when your child is only 5 years-old.
Reuters columnist Liz Weston writes that Fidelity has projected that millennials will be able to pay only 27% of projected college costs. Weston suggests that since 34% of people born between 1980 and 2000 have college degrees and 61% have attended college, these parents are more determined to help pay for their kids’ education.
She adds a Pew study showed that 86% of college graduates felt their education was a good investment, but 57% of Americans stated that the higher education system does not provide good value for the cost.