Who Says Kids Are Spoiled? Parents Expect Pre-Teens to Start Saving for College

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The cost of not getting a college degree is rising, new study finds

At 12 years old, most of us didn’t hold down regular jobs, except for maybe the odd baby-sitting or lawn-mowing gig. But one-fourth of parents today expect their kids to start socking away the contents of their piggy banks to help pay for college, starting before the age of 13. Oh, and 6% of parents don’t plan to cough up a dime towards junior’s college tuition. 

These sobering figures emerged in Fidelity Investments’ College Savings Indicator study, an annual barometer of college savings goals and achievements. About three-quarters of parents today plan to pay a portion of their kids’ college costs, but only 20% plan to cover everything.

Unfortunately, today’s kids could wind up on the hook for much more, based on Fidelity’s other findings: parents plan to pay, on average, 57% of college costs — but current savings trends indicate that they’ll really only manage to save less than a third of that amount.

On average, parents expect their children to save $4,000 through their teen years and help contribute to the cost of higher education, starting when they’re about 12-and-a-half. Despite the widespread portrait of today’s young people as spoiled and heavily dependent on their parents, it appears as if a large portion of kids pitch in for the cost of their educations.

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Fidelity found that two-thirds of parents have started saving for college; of these, 54% are familiar with dedicated 529 college savings plans, up from only 40% in 2009. Unfortunately, the number of parents actually using these accounts has held roughly steady for the past three years; this year, 36% report using them.

To be fair, this is up from the 26% of parents who said they used 529 plans when Fidelity started conducting this study in 2007, but it’s still pretty inadequate when you consider the escalating expense of college. Including tuition and fees and room and board, this cost averaged $38,589 at four-year private colleges, according to The College Board’s study of college costs for the 2011-2012 academic year.

Half of parents surveyed by Fidelity who have established 529 plans say they schedule regular contributions through direct deposits, a 15 percentage point increase. This number was offset by a corresponding, nearly equal drop in the percentage of parents who make periodic lump-sum contributions.

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One tool that can help parents struggling to save for college is a credit card with rewards that are automatically funneled into a 529 plan. CardRatings.com profiled a handful of these cards and highlighted the Fidelity Investments Rewards American Express and Fidelity Investments 529 College Rewards American Express cards, both of which offer cardholders a 2% redemption rate — money which is deposited directly into a Fidelity 529 account.

“You can’t really beat a straight 2% cash back when it’s all said and done,” points out Amber Stubbs, senior managing editor of CardRatings. “It’s so simple and you still get the most cash back.” Granted, the $240 you’ll get each year if you charge $1,000 a month doesn’t sound like a big number, but if you start early, the accumulation plus the money those funds will earn while they’re invested for a decade or more will help put a dent in the total bill.

There are a handful of other cards that offer this kind of a reward program if you don’t want to keep your 529 plan with Fidelity, although the redemption rates aren’t quite as high. Another way to use credit cards to help save for college is to get a straight cash back card that will send you checks once your rewards hit a certain threshold. Every time you get another check, simply deposit that money into a dedicated account for college.

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Whether you give your college savings preparations a boost with a credit card or not, though, the main thing is to get cracking. “Student loan debt is growing problem, and a huge obstacle for young people these days,” Stubbs says. “I definitely think more parents should consider a 529 plan whether they use one of those credit cards to help add to it or not.”