It’s no secret that college is expensive. These days, both parents and children are taking out loans to help bridge the gap. However, more parents are moving away from carrying the heavy burden of college financing. A recent study conducted by Fidelity found an increasing number of parents are expecting their children to help out with the bill. The problem, however, is that not everyone is on the same page. Some kids are in the dark about their parents’ financial expectations.
Although most parents still plan to cover most of the costs themselves (62%), Fidelity’s 2018 College Savings Indicator Study found parents want their children to set aside an average of $15,385 by high school graduation. Approximately 49% of parents said they don’t feel it’s their obligation to pay the whole bill for their children’s education.
The Cheat Sheet spoke with Melissa Ridolfi, Fidelity’s vice president of retirement and college products, to learn more about the study results.
The Cheat Sheet: What prompted Fidelity to conduct this survey?
Melissa Ridolfi: Fidelity has been conducting its College Savings Indicator Study since 2007 to understand and show how well prepared the typical American family is to cover projected college costs. With the cost of college rising, we feel it’s important to raise awareness about how prepared families are to cover college expenses, so they can adjust their savings strategies to better meet expectations. Attending college is a major life event but it also represents a great opportunity for families to have discussions about money with their children.
CS: Why aren’t parents telling their children they expect them to chip in for college?
MR: This year’s study found that many parents are delaying having critical conversations with their children about chipping in for college: 40% of parents with high school sophomores or older haven’t told their kids they’re expected to contribute to college savings, up from 31% in 2016.
It’s not uncommon for parents to feel uncomfortable talking about money with their children and some are unsure about the right age to discuss college costs, so they delay having the conversation. Any savings plan starts with setting a goal and paving a pathway to get there. The earlier that roadmap is established, the sooner parents can have “the college savings talk” with their children.
CS: How much do parents expect children to pay annually?
MR: Our study found 36% of parents expect their children to have saved at least $10,000 by high school graduation. Parents are getting more realistic and understand they won’t be able to cover the full cost of college, and they expect children to chip in. Fidelity believes college planning offers a great opportunity (and the right context) for parents to start talking about the costs with their kids.
For example, while discussing what type of college they plan to attend (two years or four years? state or private?), parents can explain the differences in costs, how much they have saved, and how much they expect their kids to contribute, and other potential sources of funding.
In part two of our discussion, we’ll talk to Ridolfi about how to prepare for college costs.
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