How Much Should Parents Save?
“Fewer parents are finding the money to save for their kids’ college,” said Suzanne Woolley in Bloomberg.com. “And those who are saving are saving less.” A new report released by student loan company Sallie Mae last week revealed that just 48 percent of American families with at least one child under age 18 had set aside money for college education in 2014, down from 51 percent in 2013 and 62 percent in 2009. Families’ average college savings balances also fell by 25 percent, from $13,408 in 2014 to $10,040 in 2015. “It’s not that Americans aren’t prioritizing college savings,” said Kelli B. Grant in NBCNews.com. Nearly 90 percent of families surveyed said they “expect their child to attend and benefit from college.” But their “overall pool for saving” has shrunk.
One thing is certainly growing: parents’ anxiety, said Kaitlin Mulhere in Time.com. A majority of the nearly 2,000 parents surveyed by Sallie Mae “described saving for college with words like ‘worried,’ ‘frustrated,’ and ‘overwhelmed.’” And is it any wonder why? The average annual cost of a private U.S. college, including tuition, fees, and room and board, is more than $42,000, up 21 percent since 2009. Even public university costs are skyrocketing, nearing $19,000 for in-state students, a 24 percent jump in just five years.
Saving enough to cover those kinds of costs is a daunting challenge for any middle-class family, said Libby Kane in BusinessInsider.com. In order to completely pay for a four-year private college for a child born this year, new parents would need to save more than $7,000 a year starting when the child is 1 year old; to cover four years at a public university, they’d need to save more than $3,900 each year. And it’s “bad news for parents who are late to the savings game.” They’d need to save $11,000 a year from the time the child is 5 to fully cover tuition at a private university, or nearly $22,000 a year if they wait until the child is 10.
It’s time for parents to stop worrying and “be selfish,” said Drew Trachtenberg in Daily Finance.com. Parental instincts aside, saving for retirement should be a much bigger priority than saving for your children’s college education. After all, “you can’t get a scholarship or a loan to pay for retirement,” but you can get one to pay for college. And while you may not want to saddle your children with a mountain of student debt, your being destitute at age 65 just might be a “greater drag on the kids.” Certainly, saving for your child’s education is a worthwhile goal. But when it comes to prioritizing, you should go “against your intuition by thinking of yourself first.”
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