Over the past ten years saving for college has become much more of a priority for families, therefore planning for this expense is on the rise. In addition, as the price of a college education continues to soar, so does the need to plan accordingly.
Today about 72 percent of American families are saving for their children’s education. That is an increase of 24 percent since back in 2007, the first time Fidelity Investments published its College Savings Indicator Study. Also, about 41 percent of families save in a dedicated college savings account like a 529 plan. That is over a 62 percent increase over the last ten years ago.
The strong desire to see children go to college has not been supported by grandparents who are high net-worth individuals. According to Fidelity’s 2016 study, only about 40 percent of high net-worth grandparents are contributing to the college savings plan of their grandchildren, even though they have stated that they are willing to support the endeavor when the time arrives.
When high net-worth grandparents help out with their grandchildren’s college education it can mean the grandchildren can graduate with less debt, and/or start saving for retirement sooner.
“It’s not surprising to learn that the majority of grandparents have yet to discuss college gifting with their children or grandchildren, despite both a strong desire and the financial ability to assist with higher education,” said Chris McDermott, senior vice president, Private Wealth Management at Fidelity Investments. “These conversations can be challenging on a number of levels, both from a relationship perspective as well as a financial and tax planning perspective.”