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Generation Generosity: Grandparents Getting Involved in College Planning – of Those Saving for Grandchildren’s Education, 35% Expect to Contribute at Least $50,000
72% say it’s important to help pay for college, citing family responsibility, desire to help avoid significant student loan debtBOSTON – According to new research from Fidelity Investments®, more than half (53 percent) of grandparents are saving or plan to start saving to help pay for college costs, and a full 90 percent report they would be likely, if asked, to make a contribution to their grandchild’s college savings fund for special occasions in place of other gifts. Of grandparents already saving or planning to save, many expect to make significant contributions. When asked how much they anticipate contributing to college education funds of all their grandchildren, they report a median of $25,000, with 35 percent expecting to contribute $50,000 or more.
Fidelity’s 2014 Grandparents and College Savings Study finds that a majority of grandparents are taking part in planning for their grandchildren’s college career. In fact, 72 percent of grandparents think it’s important to help grandchildren pay for their college education. Among those who talk to their adult children about a grandchild’s college education, 59 percent give advice about saving for college at least once a year.
Why this feeling of responsibility? The study indicates that many grandparents value a college education and consider it an important component to providing young people with the best opportunity to succeed. They also recognize that as the cost of college continues to rise, parents and grandchildren face a big challenge in saving enough to cover costs, and that without help their grandchildren could face a significant financial burden after they graduate. In fact, more than a third (37 percent) say they worry about their grandchild’s ability to attend college without incurring significant student loan debt.
“For many families, saving for college has become a team effort, and many grandparents aren’t content to sit on the sidelines,” said Keith Bernhardt, vice president of college planning at Fidelity.
“Contributions from grandparents – big or small – can add up over time and potentially open up a grandchild’s opportunities when making college decisions. Ongoing communication between parents and grandparents can help when determining how to grow their savings, as well as how to best leverage those savings to pay for college when the time comes.”
Older Generation Well-Schooled--and Engaged--in Today’s College Realities
According to the study, 52 percent of grandparents are familiar with 529 college savings plans. Grandparents like the fact that 529 plans are dedicated solely to college savings, and that earnings can be withdrawn federal income tax-free for qualified education expenses. Many also appreciate that funds can be controlled until the time is right to share them with their children, grandchildren or college of choice.
Fidelity’s business data shows a growing interest in 529 college savings plans by grandparents. The firm has seen a 12 percent increase in the number of new retail 529 accounts opened by grandparents during the first four months of 2014 (January through April), compared to the same period last year. Overall, approximately 15 percent of Fidelity-managed retail 529 accounts are owned by grandparents.
• Many grandparents are regular contributors: One key savings strategy often suggested is to automate contributions so they become habitual, giving savings time to grow. Grandparents are listening. Of grandparents already saving for a grandchild’s college education, more than a third (35 percent) contribute on a monthly basis. A third (35 percent) contribute as part of gifts on special occasions such as birthdays and other holidays.
• Grandparents often join the planning conversation: In many families, grandparents are taking part in college planning discussions. Sixty-nine percent of grandparents acknowledge talking to their children about college issues, including the total cost of college and how the family will pay for it. More than half (53 percent) talk directly with their grandchildren as well.
• Investing in the future: Forty-seven percent of grandparents are including or thinking about including college savings for their grandchildren in their long-term financial or estate plans.
Resources Available to Help Grandparents Ace College Gifting 101
When the time comes to start using college savings to pay for expenses, grandparents need to understand that in some cases their contributions may impact applications for financial aid, depending on when they are used. Fidelity’s Viewpoints article “Giving your grandkids a head start” outlines the different college savings options available, as well as the benefits and considerations to be taken into account based on a family’s individual situation. Additional information, including how to open a 529 college savings account, can be found in Fidelity’s College Resource Center, or by calling 1-800-544-1914 and speaking directly with a college savings specialist.
About the Fidelity Investments Grandparents and College Savings Study
This study presents the findings of an online survey consisting of 1,001 adults, 45 years of age and older. The survey respondents had at least one grandchild 18 years of age or younger. Interviewing for this survey was completed April 9-18, 2014 by ORC International, which is not affiliated with Fidelity Investments. The results of this survey may not be representative of all adults meeting the same criteria as those surveyed for this study.
About Fidelity Investments
Fidelity Investments is one of the world’s largest providers of financial services, with assets under administration of $4.7 trillion, including managed assets of $1.9 trillion, as of April 30, 2014. Founded in 1946, the firm is a leading provider of investment management, retirement planning, portfolio guidance, brokerage, benefits outsourcing and many other financial products and services to more than 20 million individuals and institutions, as well as through 5,000 financial intermediary firms. For more information about Fidelity Investments, visit www.fidelity.com.
The UNIQUE College Investing Plan, the Fidelity Advisor 529 Plan, the U.Fund® College Investing Plan, the Delaware College Investment Plan and the Fidelity Arizona College Savings Plan are offered by the state of New Hampshire, MEFA, the state of Delaware, and the Arizona Commission for Postsecondary Education, respectively, and managed by Fidelity Investments. If you or the designated beneficiary are not a New Hampshire, Massachusetts, Delaware or Arizona resident, you may want to consider, before investing, whether your state or the designated beneficiary’s home state offers its residents a plan with alternate state tax advantages or other benefits.