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One third of parents have decreased or stopped saving for college

Print Posted by Cheryl Costa October 17, 2008 09:29 AM

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According to a recent study by Fidelity Investments, more than a third of the nation's parents have decreased the amount they are saving or have stopped saving entirely for their children's college education. Given the current level of financial anxiety out there and the recent increase in unemployment, this statistic really isn't surprising, but with the market down, now would be an excellent time to be investing new money.

The study also found that 60 percent of parents have at least started saving for college but only 30 percent are investing in a dedicated investment vehicle like a 529 plan. This is interesting because the survey results indicated that most parents can afford to pay just 21 percent of expected college expenses, but parents who save in 529 plans can afford to pay for 40 percent of the expected college expenses.

An even more startling statistic was that 35 percent of the parents surveyed expect that they will have to delay their retirement in order to meet college expenses. These individuals are taking a risk that they will be healthy enough to continue working and that they will have jobs to work at.

If parents are saving less, the remainder has to come from somewhere and the study indicates that 55 percent of parents will be expecting their children to work part time while in college, 44 percent plan to have their children live at home while commuting to college, 37 percent will be encouraging their children to attend a less expensive public school and 23 percent will ask their children to graduate in fewer semesters.

Also, more and more parents will be relying on student loans. In 2007, 52 percent of parents planned to rely on loans to help meet college expenses. In 2008, that figure had risen dramatically to 62 percent.

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Local finance professionals share insights and advice on issues such as budgeting, managing debt, and retirement planning.

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About the contributors

Andrew Chan is the founder of Integrative Financial Advisors in Framingham. He provides comprehensive financial planning advice and investment management services. He has been an adviser for over 12 years and works with clients to integrate all aspects of their finances including investments, retirement, education funding, and tax planning.

Cheryl Costa is a managing director at AFW Wealth Advisors, which has offices in Natick and Purchase, N.Y. She advises clients on investing, education funding, and estate planning. She holds a master’s in business administration from Boston University.

Jamie Downey has been an accountant for more than 14 years. He's a partner at Downey & Co. in Braintree. Prior to joining the firm, he served as a manager in the audit department of accounting firm KPMG.