Most grandparents think it's important for them to help pay for their grandchildren's college education, a new survey shows.
About 72% feel that way, but only 37% say they're currently saving for their grandkids' college expenses. Grandparents who are already saving or planning to save say they're going to give a median of $25,000 to all their grandchildren; and 35% are planning to give $50,000 or more.
The online survey, sponsored by Fidelity Investments, polled 1,001 adults, 45 and older, who have at least one grandchild 18 or younger. The average household income of respondents was $85,000.
And 90% said they would likely make a contribution to their grandchildren's college-savings fund for special occasions such as birthdays and holidays, instead of giving them other gifts.
Although many grandparents want to contribute to college for their grandchildren, some may not have the financial means to do so, says Keith Bernhardt, vice president of college planning at Fidelity Investments. "Grandparents have to look out for themselves as well. They have to be purposeful and thoughtful and not risk their own financial well-being in retirement."
• 37% of grandparents worry about their grandchildren's ability to go to college without coming out with significant student loan debt.
• Of the grandparents who are already saving for their grandchildren's college education, 35% are putting aside money every month; 35% contribute as gifts on special occasions.
• 52% of grandparents are familiar with 529 college savings plans, which have tax advantages and are designed to help families save for future college costs.
"The 529 plans have estate-planning benefits for grandparents while at the same time grandparents maintain tremendous control over the assets and can take the money back if they need to," but if they do that, they have to pay taxes and penalties on the earnings, Bernhardt says.
Certified public accountant Joe Hurley, founder of savingforcollege.com and author ofThe Best Way to Save for College: A Complete Guide to 529 Plans, says, "Grandparents who have enough for their retirement are looking for the best way to use the rest of the money and helping their grandchildren get through college is at the top of that list."
Hurley says students have to report grandparents' financial assistance from the previous year, whether from 529 plans or other sources, on their financial aid applications.