Listen up, parents, would-be parents and grandparents who want to help: The best time to start saving for a child's college education is as soon as Mommy is pregnant. The best way to do it is as a family, with the children contributing what they can.
I've long felt this way, and my feelings are reinforced by recent studies that show the impact of rising college costs on American families.
Overall, students and parents continue to consider higher education a critical and worthwhile investment for the future, according to "How America Pays for College," an annual study conducted by the Gallup organization for the Sallie Mae Corporation. Still, 56 percent of families reported ruling out some schools because of cost. Also, 58 percent worried that colleges would raise tuitions, including 35 percent who were "extremely" worried.
Parents on average paid about 45 percent of college costs, 36 percent from current income and savings and 9 percent by borrowing the money. The average student paid 24 percent of the cost, 14 percent through borrowing and 10 percent from savings and income. Grants and scholarships accounted for 25 percent, and friends and relatives contributed 6 percent.
Luckily, when I went to college in the 1960s, scholarships and part-time work took care of all my cost of two years of community college and two years at a four-year-school. When my daughter, Veronica, attended the University of Florida, a scholarship she won on merit covered much of the cost. My wife and I put up the rest from our savings. Veronica helped out by working summer jobs and adhering to a budget in line with what the university suggested for living expenses on campus.
Today it's much harder to put a child through college, with costs rising at nearly 6 percent a year and estimated to exceed $124,000 for four years of college for today's high school seniors, according to projections by the College Board.
No wonder a more recent survey - the annual "College Savings Indicator" study by Fidelity Investments - found that parents of college-bound children in high school say they can cover only 11 percent of college costs, down from 15 percent in 2008. More parents (43 percent this year compared to 35 percent in 2008) say they will have to delay retirement to pay for college.
But they won't have to do it all. A whopping 90 percent of graduating high school seniors, surveyed for the first time in the Fidelity study, believe they should pay for at least some college costs. Students are willing to explore many strategies for cutting expenses, including taking advance-placement classes in high school to finish college sooner, delaying college until they have saved more, and studying abroad.
"It wasn't a surprise to see that tough economic conditions and the ever-rising costs of college are crippling families' budgets," said Steve Austin, a Fidelity spokesman. "However, we were very impressed to hear that high school-age children are doing so much more to help."
That's not just an isolated finding. Another study by TD Ameritrade found that 62 percent of teenagers 14 to 19 report saving for college, compared to just 40 percent of adults who did when they were that age.
The Ameritrade survey also found college is the top saving goal for today's teens, with 78 percent reporting they would like to establish a plan with their parents to share in the cost of their education. Parents, it seems a conversation is in order.
