Parents Not Saving Enough for Kids' Education

Here's a "shocker" (not really) -- parents are not saving enough for their kids' college education. First, let's start with the facts from MSNBC:

The study found that 87 percent of parents believe scholarships and grants will cover at least part of their children's undergraduate expenses, and nearly three-quarters think their children are "special or unique" enough to win a scholarship.

Financial aid administrators said 92 percent of parents overestimate the amount of scholarship money their children will receive.

Everyone thinks their kids are "special" and will get some money to go to college (me included). But thinking about it and acting on it need to be two different things. You can think that your kids will get some college money on scholarship, but you need to plan for the possibility that you may have to pay for it all -- something parents aren't doing:

"Parents with children ages 14 to 17 plan to have an average of $12,000 saved when their child reaches college age," the study found. That would just cover the cost of one year's schooling at a four-year public college or university, according to the most recent data from the College Board, a nonprofit association based in Washington, D.C. It would fall far short of the $29,026 College Board estimate for one year at a private institution.

"Parents do seem to understand the high cost of college, but they're not doing anything about it," DeLong said. "They're not considering college saving as part of their overall financial plan, they're not talking to financial advisers."

Again, not a real shocker here. But let's give parents a bit of a break since they're saving for several major financial liabilities at once -- and they should be putting retirement ahead of college saving anyway. That said, there should be a bit more in the college fund, wouldn't you say? Unfortunately, many parents are headed into debt to fund their child's college education:

Jennifer DeLong, director of college savings plans for AllianceBernstein, said that instead of saving, parents are taking on debt to fund their children's educations. And they're also expecting the children to take on debt, which can make it harder for the young people to get on their feet financially after graduation.

A few thoughts on this:

1. As you know, I hate debt in any form. I'm especially against saddling my children with debt at the start of their adult lives.

2. That said, borrowing for college is a financial loan that will more than pay off in the long run. See College is Expensive, but Well Worth It Financially (Or: Give Four Years and $40,000 and Get an Extra $1 Million) for details.

3. I think the best plan for saving for college is to put as much as you can in savings and also do all you can to keep college costs as low as possible. For help on both of these, see Best of Free Money Finance: College and Education Posts.

Comments

[Linda]

When did it become necessary to fund your kid education?

I honestly feel it is the child responsibility.

Its bad enough that adults have to woring about satisfying their own needs, now they have to worry about another bill.

I guess Im from the old school, If you cannot afford a certain college try another less expensive----its not the end of the world

[Trent]

I agree with Linda. On my eighteenth birthday, my parents tossed me out the door to sink or swim on my own. I earned two degrees without a dime of support from my parents. It taught me a lot more than having my parents pay for everything.

[Binary Dollar]

By the time I have kids, tuition is going to cost $5473598374598732NINER (I've calculated). The only way my kids could afford that is if they're slinging rock on the corners. Either that or take on massive student loans.

Tuition is rising at huge rate. I think I'll try to fund 1/2 of my kid's college. I'll match them dollar for dollar.

IF I'm not broke that is....

[Jeremy]

While it is true parents are not saving much for their children's college education, I think the parents need to make sure their own financial house is in order before going crazy with college savings. You can get a loan to pay for college, but you can't get a loan for retirement.

That being said, it would be wise for parents to utilize some sort of college savings plan, but only after they have a solid retirement savings plan in place. Then supplement additional savings for education.

While I'd love to give me kids a free ride to college, I also understand that not only can you get loans to pay for college, but you can work while going to school. I did it, worked on campus part-time and that alone paid for a great deal of tuition. I just don't think I want to bet on the fact if I sacrifice my retirement savings to fund a college education that my child will become successful enough to support me in my elder years. That is a burden I don't wish upon anyone.

[HC]

As long as tuition keeps increasing above the inflation rate, it is going to be harder and harder for kids to avoid taking out massive loans.

Obviously, parents should meet their own needs first, but I don't think a half-and-half plan is coddling at all.

My parents agreed to take on a family loan and the "carry costs" (the shortfall on the semester bill), and I got scholarships, work-study, and loans to cover everything else. Trust me, I took my education seriously.

[BCFLA]

As a 20-something year old, I've seen a lot of kids make it on their own - including myself. Not because it was easy or that I had a choice but I had to. It was life or death, and no one was there for me to depend on. I think being able to emotionally, mentally, and financially preparing your children for the "real world" should be TOP priority. You can't expect to give them 20-40K for college and them know what to do with it properly unless you have spent the painstaking time of showing them by example and helping them with money, savings, stocks, investing, planning, 401K's, rent/mortgages, all that stuff. Guess what parents? WE DON'T LEARN THIS STUFF IN HIGH SCHOOL.

Now THAT IS your responsibility. If you fail to do that - you've failed as a parent. PERIOD.

Show them you care by your actions. That's what they see.