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Parents trip on tuition goals
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June 10, 1999: 5:28 p.m. ET
Half of adults with college-bound kids don't save regularly, many start too late
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NEW YORK (CNNfn) - Parents who plan to pay for their children's college education usually have strict savings goals in place right from the start - they're just not following through, new research reveals.
In its annual survey, Fidelity Investments found that only half of parents with college-bound kids are saving regularly. When asked about their financial goals, however, 82 percent said saving for college is among their top two priorities.
The survey also found that despite rising tuition costs, some parents are putting off saving until it is too late to reach their financial goals.
Roughly one-third of parents with children age 14 and younger said they expect to save enough to cover all college costs. But as their kids mature, parents sometimes lower their expectations.
"Our survey confirms that if parents wait to start, they run the risk of not saving enough for when their student reaches college age," said Stephen Mitchell, senior vice-president of Fidelity Investments. "If parents start saving early and use a tax-deferred plan, like the 529 Plan, they can significantly improve their chances of building the funds they need to pay for their children's college."
Tools
According to Fidelity, more than 30 states nationwide are offering 529 plans, which can be either prepaid plans designed to keep pace with college inflation, or investment plans, which increase the odds of a larger return.
Both types allow contributions to grow tax-deferred for tuition and other qualified college expenses at colleges and universities anywhere in the country.
Fidelity's survey showed that awareness of this new savings tool grew 70 percent from last year, but that the overwhelming majority of parents still are unfamiliar with the plans. After having the 529 plan explained to them, roughly half of all parents said they would consider using it.
Savings vehicles
Among the parents already putting money aside for college, one-third have embraced tax-advantaged vehicles designed to make the burden of college tuition a little lighter. They include 529 plans, pre-paid tuition plans, Education IRAs, and Custodial Accounts.
Many parents still, however, have a portion of their college savings in more conservative and low-return vehicles, such as traditional bank accounts or government bonds. And some park their dollars in taxable accounts, such as stocks, mutual funds and certificates of deposit.
Betting on assistance
It's not all bad news, though. The survey found that parents are realistic about, and in some cases even overestimating, what tuition and expenses will be when their children reach college age.
Recent statistics by The College Board, cited by Fidelity, suggest that, if current trends continue, the average cost for a child entering college in 18 years may be more than $80,000 for a four-year public institution and upwards of $200,000 for a four-year private institution.
At the same time, however, the vast majority of parents view financial aid as a fallback plan. Four out of five parents surveyed expect scholarships to fill in the gaps if they fall short of their savings goals.
That's a pretty optimistic outlook considering only 6 percent of all parents reported that their high school-age student had actually been awarded a scholarship.
"As costs for college continue to increase and financial aid continues to shift toward reliance on loans, it is more important than ever for parents to take responsibility in preparing financially for their children's college futures," Mitchell said. "Whether a child is a year old or entering high school, parents should take a good look at the savings options available and start right away." 
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