It’s no secret that costs for higher education have been increasing, putting a toll on many American families’ finances.
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The new College Savings Indicator Study, released by Fidelity earlier this month, found that this year, American parents “are not on track to meet their college savings goals, despite them ranking college as their No. 1 savings priority.” This suggests boosting your child’s college savings without breaking the bank can be increasingly challenging. Yet, experts argued there are some ways to do so.
The Fidelity study also found that while “most parents are concerned about inflation and the rising cost of college,” a startling “one-third have no idea what college will cost for their child.”
Other findings include that 55% of parents use “their own best guess” to estimate college costs and that 54% of parents whose children are nearing college age “admit their child will have fewer options due to costs.”
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The Cost of College Continues To Rise
To put this in context, the total cost of college continues to rise to more than $41,000 for a public four-year out-of-state institution, according to Fidelity. On top of tuition, there are also associated costs such as housing, food and activities.
According to the College Board, for the 2024-2025 school year, these costs range from $17,680 to $26,390 depending on the location and lifestyle.
“Saving for college can be a challenge for many families,” said Tony Durkan, vice president, head of 529 relationship management at Fidelity Investments. While parents prioritize their children’s college education, the reality is that balancing day-to-day expenses with long-term savings can be daunting.”
Durkan also added that the study found 93% of parents say they’re worried about the rising cost of college — and more than one-in-four claim inflation is the most significant barrier to their ability to save more for college expenses.
“Fidelity’s study revealed that parents continue to agree the value of college is worth the cost, and that cost continues to rise so parents are increasing their expectations and changing how and where they save to meet this new reality,” he added.
Here are some ways to boost your child’s college savings without breaking the bank.
Having a Plan in Place and Starting the Conversation
According to Durkan, having a plan in place, or even starting the conversation, can make the difference.
In fact, 80% of parents who have talked to their child about the total cost of college and post-graduate implications have started saving, the study found.
Additional differences are eye-opening: A whopping 44% of parents who had a conversation about college costs have opened a 529 account. This is compared to only 29% who had not developed that conversation, the study found.
A 529 plan is a tax-advantaged savings account designed to encourage saving for educational costs, according to the Securities and Exchange Commission (SEC).
Finally, those who have talked to their children have a median saving of $20,000, compared to $12,000 for the other cohort of parents.
Understanding New Legislation
Durkan also noted that he often hears concerns from parents who aren’t sure if they’ll use their entire savings — or what may happen if their child decides not to go to college.
“Fortunately, new legislative changes may ease some of these concerns, as under certain conditions, 529 plan assets can now be transferred to a Roth IRA for the beneficiary — giving them a retirement boost,” he said.
This new rule can help 529 account owners avoid taxes and penalties for withdrawals, and can be particularly appealing for people looking to help their children get a head start on retirement, Durkan added.
This new provision is part of the SECURE Act 2.0, passed by Congress at the end of 2022, “which overhauled parts of the American retirement system,” according to Fidelity.
While there are limitations, the ability to use these “leftover funds” is a silver lining for many families.
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This article originally appeared on GOBankingRates.com: 2 Ways To Boost Your Child’s College Savings Without Breaking Your Budget
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