Most American parents want to send their kids to college — but, unfortunately, they aren't financially prepared.
Fidelity Investment's 10th Annual College Savings Indicator Study reports that although 70 percent of parents intend to cover the cost of tuition in full, they're only on track to fulfill 29 percent of that goal by the time their children reach freshman year.
On the plus side, more parents than ever are saving for college, with 73 percent putting away a median amount of $300 per month. Of those actively saving, 66 percent have a financial plan in place and 41 percent are taking advantage of 529 college savings plans.
Here's the average amount American parents have saved up at various stages:
- Parents with kids ages 0-to-5: $20,700
- Parents with kids ages 6-to-13: $39,300
- Parents with kids ages 14-to-18: $52,300
These savings fall in line with Fidelity's $2,000 rule, which instructs parents to multiply their child's age by $2,000 in order to stay on track to cover half the average cost of a four-year, public university. In accordance with the $2,000 rule, parents of four-year-olds should have $8,000 invested in a 529 plan or similar, and those with 17-year-olds in the house should have $34,000 socked away.
But it appears parents hoping to pay tuition costs in full still have a ways to go — and it's only going to become more difficult. For over a decade, the average cost of tuition has risen at more than double the rate of inflation, and Vanguard estimates that in 18 years a four-year degree at a private college could cost nearly $500,000.
However, these statistics are unsurprising when considered within the context of Americans' overall savings habits. The median amount of retirement savings for all families in the U.S. is just $5,000, and the median for families with some savings is $60,000, the Economic Policy Institute reports.
Even more alarming is the fact that 35 percent of all adults in the U.S. have only several hundred dollars in their savings accounts, 34 percent have zero savings and about half of U.S. families have no retirement account savings, according to a 2016 GOBankingRates survey.
The lesson here? Save as much as you can as early as you can — especially if you plan to put your kids through college.