Parents have on average $18,000 saved for college, and that's still not nearly enough

  • The average amount saved is up more than 10 percent from 2016 and the highest amount since 2013.
  • About 35 percent of all parents are not planning or saving for college in any way.
Source: ABC | YouTube

Parents are saving more for college this year than in the past, yet their preparedness could still use improvement.

The average amount saved is around $18,000, up more than 10 percent from 2016 — and the highest amount since 2013, according to lender Sallie Mae's 2018 report, "How America Saves for College."

More than 2,000 parents with children under age 18 were interviewed between Jan. 18 and Feb. 15.

"The increase in the average amount saved is significant," said Mark Kantrowitz, a student loan expert. "But it would be better for families to save more."

After all, those savings represent just a fraction of the overall costs of college.

The average private nonprofit college charged $46,950 for tuition, fees and room and board in the 2017-2018 academic year, according to the College Board.

And the price of higher education is only predicted to skyrocket in the following decades.

Sallie Mae's annual report also shows there's a gap between what black and Hispanic parents are able to save for college compared with white parents.

And about 35 percent of all parents are not planning or saving for college, the report found.

Despite the benefits of saving for college with a 529 plan — the tax-advantaged investment funds that can be used for education costs, just 29 percent of parents utilize one, compared with 45 percent who keep their college savings in a general bank account.

It would behoove more parents to keep their college savings in a 529 plan, said Kantrowitz. "If you start saving at birth, about a third of the college savings goal will come from earnings," he said.

But parents should start saving, if possible, at whatever point they're at.

"Even if you start late, it is still worthwhile to save because every dollar you save is a dollar less you'll have to borrow," Kantrowitz said.

There seems to be a shift in parents' attitudes about who is responsible for college costs. In particular, parents increasingly feel that the cost of college shouldn't fall on them alone.

"There's a sense of realism that college is expensive and parents cannot pay for it all on their own," said Marie O'Malley, senior director of consumer research at Sallie Mae.

Indeed, this year, nearly 60 percent of parents say their child should chip in for their education, up from around 50 percent in 2016, the report found.

Parents expect their savings to cover just about a third of their child's higher education price tag.

Parents are also growing more protective of their nest egg. Just 10 percent of parents plan to tap their retirement savings for their child's education, compared with 20 percent in 2016.

More from Personal Finance:
Universal basic income: U.S. support grows as Finland ends its trial
How to join the ranks of money-savvy independent workers
Meghan Markle's tax bill will get a lot more complicated after royal wedding