Fidelity® Study Finds Six in 10 High-Net-Worth1 Grandparents Are Not Helping Grandchildren Save for College, Even Though Nearly Seven in 10 Are Willing to Help Foot the Bill
According to Fidelity’s 2016 Family and Finance Study, only four in 10 high-net-worth grandparents (39 percent) are helping with their grandchildren’s college savings, even though most high-net-worth individuals surveyed (74 percent) would be willing to support the cost of their grandchildren’s education when the time comes. Similarly, seven in 10 parents who work with advisers agree that financial contributions from family members will be important to funding their child’s education, but only 28 percent of parents say family members have offered to help with college savings.2 In a climate where the cost of education continues to rise, assisting the next generation with college savings can mean the difference between grandchildren graduating with little or no debt and postponing progress on major financial goals like saving for retirement.
“It’s not surprising to learn that the majority of grandparents have yet to discuss college gifting with their children or grandchildren, despite both a strong desire and the financial ability to assist with higher education,” said
Only a third of parents and their adult children agree on the appropriate time to initiate family financial planning conversations. “We encourage grandparents to discuss their desire to help fund major life milestones immediately, and we even help facilitate family financial conversations around topics like funding college, weddings and first-time home purchases,” added McDermott. “The more families discuss financial planning goals and values around money, the more likely their children and grandchildren will develop an appreciation of their financial position and their family’s commitment to their future success.”
Gifting for college education is not a simple as just writing out a check, however. Grandparents seeking to help fund college costs for their grandchildren may want to consider enlisting the help of a wealth management adviser who can explain the tax implications of the most common gifting strategies. This is an important first step when deciding which option could make the most sense, including:
- Gifting to a 529 Plan account owned by the grandparent
- Gifting to a 529 Plan account owned by the parents
- Establishing a UGMA or UTMA custodial account
- Paying the college or university directly
- Waiting until after graduation to gift the funds directly to the grandchild
Wealth advisers can also moderate college planning conversations among families to help bridge any gaps, and ensure families have a comprehensive wealth plan that reflects their entire financial situation. If education is an important part of the family’s legacy, financial professionals can also help reinforce how important education is the family’s core values.
For more information on college savings, Fidelity provides tools and resources for families, including:
- A 529 Online Gifting Service, which lets owners of Fidelity’s retail 529 college savings accounts use social media to encourage friends and family to help them save for college, with just a few easy steps online.
- Viewpoints articles provide insights on college funding for grandparents, including: How grandparents can help fund college.
- Visit Fidelity
Private Wealth Managementto learn more about Fidelity’s comprehensive wealth planning and investment strategies.
The third biennial
As part of the study, Fidelity conducted a survey of parents with college-bound children of all ages. Parents provided data on their current and projected household asset levels including college savings, use of an investment advisor and general expectations and attitudes toward financing their children’s college education. Using Fidelity’s proprietary asset-liability modeling engine, the company was able to calculate future college savings levels per household against anticipated college costs. The results provided insight into the financial challenges parents face in saving for college. Data for the Indicator (number of children in household, time to matriculation, school type, current savings and expected future contributions) was collected by Boston Research Technologies, an independent research firm, through an online survey from
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2Fidelity 2016 College Savings Indicator Study