10-Year College Progress Report: Fidelity® and MEFA Find Record-High Number of Massachusetts Families Saving and Investing in 529 Plans

Looking Back, Many Recognize Need for Extra Credit: Nearly Half of Parents with Kids Approaching College Say They Could Have Saved $100 or More Each Month

BOSTON--()--In the 10th edition of its College Savings Indicator Study, Fidelity Investments® and the Massachusetts Educational Financing Authority (MEFA) today announced that saving for college is at an all-time high with 73 percent of Massachusetts families currently saving for their children’s higher education, up from 65 percent in 2007, the first year the study was published. The study also finds a 44 percent increase in the use of dedicated college savings accounts, such as 529 plans. In fact, this year nearly half (46 percent) of Massachusetts families report owning a 529 college savings account. Other notable trends in college savings behaviors since the first year of the study:

                 
Massachusetts Study Findings       2007       2016
Parents saving for college       65%       73%
Parents saving in dedicated college savings account, such as a 529 plan       34%       49%
Parents considering strategies to manage college costs (such as having            
child live at home, or graduate in fewer semesters)       46%       65%
Parents considering strategies to generate more income to pay for
college (such as having a non-working spouse return to work, or
having child work on campus)       64%       78%
Median amount saved for college in the previous year       $1,500       $2,000

“Over the last decade, we’ve seen an increased focus on college planning, with parents working hard to set their children up for success,” said Thomas Graf, executive director of MEFA. “Creating a plan can be challenging for young families, and at MEFA, we are committed to providing free resources to all families across the Commonwealth to assist them with building that plan.”

Building on Ten Years of College Savings Progress

Massachusetts parents are increasingly committed to funding their child’s college education, with a majority (76 percent) citing their own experiences paying for college and managing student loan debt as influencing this decision. On average, parents plan to pay for 66 percent of their children’s total college costs – compared to 59 percent in 2012 (the first year this was asked in the study).

This increased intention is driving many to grow their savings. In 2007, families of the Commonwealth reported saving a median of $1,500 for college in the previous year. Fast forward to 2016, parents report saving a median of $2,000 last year. Parents saving in a 529 plan are contributing even more, with a median savings of $2,500 reported for 2015. Furthermore, among 529 plan owners, more than a third (36 percent) have increased their contribution rate in the last 12 months.

Even with increased savings, this year’s research finds that parents in the Commonwealth are on track to reach just 36 percent of their college funding goal by the time their child is ready to head to campus. Many parents recognize this short-fall, with 62 percent saying they still feel off-target in achieving their college savings goal.

When parents with older kids (10th grade+) were asked to think back 10 years, nearly half say they could have saved more each month for college. Of those who said they could have saved more, the median amount more they said they could have saved: $200 per month. While an additional $200 may sound ambitious, 48 percent of parents with kids in 10th grade and higher said they could have saved at least $50 each month, and 47 percent could have saved at least $100. These extra dollars, if invested early and given time to grow, could yield significant savings1:

     
Increased Amount per Month  

Potential Additional Accumulation
Over 18 Years*

$50 more   $19,368
$100 more   $38,735
$200 more   $77,471
* Assumes a 6% annual investment rate of return

Your own account may earn more or less than this hypothetical example.

“For many families, finding an extra $50 or $100 per month may seem out of reach, but these extra dollars could potentially boost college savings by nearly $20,000 or even $40,000. This potential could be a powerful motivator to consider strategies to carve out that additional savings,” said Keith Bernhardt, vice president of college planning at Fidelity. “Fidelity’s online College Savings Quick Check calculator can show parents the impact of saving a few extra dollars each month, based on their own timeline.”

Aware of the need save more, over half (56 percent) of Massachusetts parents still say they are unclear on how much they should be saving monthly. And, two-thirds (67 percent) wish there more specific recommendations on how much they should save for college. Even for those able to carve out additional savings, knowing how best to maximize those dollars also remains challenging. More than half (54 percent) of parents say they don’t fully understand how to invest their college savings.

“Families are hungry for more information and resources to help better prepare for college,” added Mr. Graf. “If we can help parents take even one new step to better educate themselves, plan and save more effectively, that can be the jumpstart that moves them closer to their college goal.”

“What I Wish I Knew” Ten Years Ago About Saving for College

For the 10th edition of Fidelity’s study, Massachusetts parents with kids in grades 10 and higher were asked what they wished they had done 10 years earlier to help better prepare for college costs. In addition to saving more each month, here are some their other top tips:

  • Consider opening a 529 college savings account sooner
  • Treat contributing to college savings like a bill you have to pay each month
  • Increase savings by one percent or more each year
  • Prioritize college savings over impulse purchases
  • Open a cash back credit card, with rewards saved to a dedicated college savings account

For other strategies to help carve out extra savings for college, read Five Lessons Learned for College Savings.

Additional Resources for Families

MEFA and Fidelity offer complimentary college saving and financing guidance provided by dedicated representatives who are available to answer questions regarding savings options, including how to open a U.Fund College Investing Plan account. Additionally MEFA and Fidelity offer in-person college planning guidance at Fidelity’s nine investor centers across Massachusetts or by calling 800-544-2776.

At www.mefa.org, MEFA provides free, expert guidance on planning, saving and paying for college, as well as links to career planning and financial aid resources. In addition, MEFA’s community outreach includes more than 400 webinars and seminars annually led by college planning experts across Massachusetts. Parents can visit Fidelity.com/ufund to access online planning tools, research college savings options and learn how to search and apply for financial aid and scholarships. Families can also learn about 529 online gifting, a service that enables owners of U.Fund College Investing Plan accounts to create a personal college savings webpage for their child or other beneficiary and share a link with family and friends interested in gifting to the account online.

Fidelity’s College Savings Learning Center provides a library of online resources for parents, including a more detailed college planning tool for when parents have more dedicated time, video courses on saving account options and strategies, and resources on supplementary ways to pay for college, such as how to apply for financial aid and scholarships. Additional Viewpoints articles provide more insights on college topics, including: Are you saving enough for college? and How much college can you afford?.

About the Fidelity Investments 2016 College Savings Indicator Study
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) were collected by Boston Research Technologies, an independent research firm, through an online survey from May 13 – June 12, 2016, of 2,196 parents nationwide with children aged 18 and younger who are expected to attend college. The survey respondents had household incomes of $30,000 a year or more, and were the financial decision makers in their household. College costs were sourced from the College Board’s Trends in College Pricing 2015. Future assets per household were computed by Strategic Advisers, Inc. (a registered investment adviser and wholly owned subsidiary of FMR LLC). Within Fidelity’s asset-liability model, Monte Carlo simulations were used to estimate future assets at a 75 percent confidence level. The results of the Fidelity College Savings Indicator may not be representative of all parents and students meeting the same criteria as those surveyed for this study.

About Fidelity Investments
Fidelity’s goal is to make financial expertise broadly accessible and effective in helping people live the lives they want. With assets under administration of $5.6 trillion, including managed assets of $2.1 trillion as of July 31, 2016, we focus on meeting the unique needs of a diverse set of customers: helping more than 25 million people invest their own life savings, nearly 20,000 businesses manage employee benefit programs, as well as providing nearly 10,000 advisory firms with investment and technology solutions to invest their own clients’ money. Privately held for nearly 70 years, Fidelity employs 45,000 associates who are focused on the long-term success of our customers. For more information about Fidelity Investments, visit https://www.fidelity.com/about.

About MEFA
The Massachusetts Educational Financing Authority (MEFA) is a not-for-profit self-financing state authority dedicated to making higher education more accessible and affordable for students and families across the Commonwealth of Massachusetts. MEFA was created by the state legislature, at the request of Massachusetts colleges and universities and provides community education programs, college savings plans, and low-cost financing options. In its over 30 year history, MEFA has assisted hundreds of thousands of families in financing a college education. For more information, visit www.mefa.org to learn more or follow MEFA on Twitter @mefatweets and on Facebook at mefaMA.

The U.Fund College Investing Plan is offered by MEFA and managed by Fidelity Investments. If you or the designated beneficiary is not a Massachusetts resident, you may want to consider, before investing, whether your state or the designated beneficiary's home state offers its residents a plan with alternate state tax advantages or other benefits.

Units of the Portfolios are municipal securities and may be subject to market volatility and fluctuation.

Guidance provided by Fidelity is educational in nature, is not individualized and is not intended to serve as the primary or sole basis for your investment or tax-planning decisions.

Fidelity, Fidelity Investments and the Fidelity Investments & Pyramid Design logo are registered service marks of FMR LLC.

MEFA, MEFA U.FUND MASSACHUSETTS 529 PLAN and U. FUND are registered service marks of the Massachusetts Educational Financing Authority.

Boston Research Technologies is not affiliated with Fidelity Investments.

Please carefully consider the plan's investment objectives, risks, charges, and expenses before investing. For this and other information on any 529 college savings plan managed by Fidelity, contact Fidelity for a free Fact Kit, or view one online. Read it carefully before you invest or send money.

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© 2016 FMR LLC. All rights reserved.

1 Savings estimates derived using Fidelity’s College Savings Quick Check calculator

Contacts

Fidelity Corporate Communications
(617) 563-5800
Follow us on Twitter @FidelityNews
or
Michelle Tessier, 201-915-7470
Michelle.Tessier@fmr.com
or
MEFA
Martha Savery, 617-224-4813
MSavery@MEFA.org

Release Summary

Fidelity announces its 10th annual College Savings Indicator Study, which measures how prepared parents are to meet the costs of college.

Contacts

Fidelity Corporate Communications
(617) 563-5800
Follow us on Twitter @FidelityNews
or
Michelle Tessier, 201-915-7470
Michelle.Tessier@fmr.com
or
MEFA
Martha Savery, 617-224-4813
MSavery@MEFA.org