According to recent studies, millennials believe their top financial priority should be saving up for their kids’ college studies.
The findings were collected as part of Fidelity Investment’s 9th annual College Savings Indicator, which analyzed the attitudes of 2,470 parents regarding the future academic expenses of their offspring. The subjects, with household incomes of at least $30,000, all had children aged 18 and younger, who were likely to pursue higher education.
Researchers determined that millennial parents (aged 18 to 34) are more concerned than their Generation X counterparts with saving up to ensure that their kids go to university. 43% of people in this age group use tax-advantaged 529 college savings plans, while just 43% of those in older categories employ such methods.
Also, according to the research firm, 74% of the respondents born between 1981 and 1985 have already saved up money for this purpose, a significant increase from 8 years ago, when 58% of the parents in the same age group expressed this engagement.
In addition, 48% of those aged between 30 and 34 report that their goal is to cover all the costs related to the college education of their offspring. Back in 2007, just 16% of people included in this age group were prepared to pay their children’s college taxes in their entirety.
According to Keith Bernhardt, Fidelity’s vice president of retirement and college products, this may be because most millennials nowadays have been faced with recession for a large portion of their lives. As a result, they place great emphasis on thriftiness and are more concerned about the future.
Given that they have been overwhelmed with the burden of student loans, while striving to achieve financial independence, they are more sensitive to the idea that their children may also have to suffer this fate. Currently, around 43 trillion U.S. citizens owe $1.2 trillion in college debt, and $103 billion of that total loan is in default.
The theory suggesting this age group’s predilection for being economical has been supported by other surveys as well. For example, a Bankrate study showed that those between 18 and 34 are more debt-adverse and over half of them put at least 5% of their income into savings.
A similar survey by Financial Finesse discovered that 72% of millennials earn more than they actually spend (compared to 68% of those from Generation X).
Although it may be admirable that millennials are so keen to ensure that their children receive a proper education, this ambitious goal may suffer some setbacks, as these young parents are faced with other unexpected expenses as well.
Overall, millennial parents included in this survey were hoping to cover at least 66% of their kids’ college studies, and they had saved a median $1,500 for this purpose. By projecting these current rates into the future, experts estimated that just 27% of the expected costs may actually be covered.
Therefore, while young parents may display more willingness than their predecessors to help their offspring through college, it remains to be seen whether they will actually achieve this objective.
In addition, an excessive focus on college savings may be inadvisable, according to financial consultants. They believe that more importance should be placed on saving up for retirement, since, unlike pension plans, university studies can always be covered by loans. According to findings reported by the Investor Protection Institute just 38% of all millennials save money for old age.
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