About half of Americans with assets of more than $250,000 said they won’t pay the entire tab for their children’s college education, according to Bank of America Corp.
About 47 percent of those surveyed in the Merrill Lynch Affluent Insights Survey released today said they didn’t or won’t pay the full cost of higher education. Limiting access to the bank of mom and dad will help teach their kids financial responsibility, 29 percent of respondents said.
Tuition and fees for in-state students at public four-year institutions averaged $7,605 for the 2010-2011 school year, according to the College Board, a New York-based nonprofit. At private nonprofit four-year colleges and universities, costs averaged $27,293.
“What the numbers show is just the rising cost of college and the financial demands on middle class and affluent families,” Andy Sieg, head of retirement services and global investment solutions for the Charlotte, North Carolina-based bank, said in a telephone interview before the survey was released.
Having kids foot at least part of the bill for college is an example of how a “sandwich generation” is coping with caring for parents and dependent children at the same time, Sieg said. With older generations living longer, high rates of unemployment for recent college graduates and expectations to work later in life, affluent individuals are changing their views on financial planning, he said.
Saving early for college has become a generational trend, as 60 percent of affluent parents age 35 to age 50 start college savings accounts before or within the first year of their child’s life, compared with 15 percent who were over age 65 and began saving early, the survey said.
About half of parents said “financial know-how” was a trait they hoped to impart to their children. Among parents who used a financial adviser, 64 percent said they shared some of their adviser’s guidance with their children, while almost 20 percent of parents age 51 and older had invited their children to meet with the family’s adviser.
Parents also were inclined to lend a helping hand to adult children with about 82 percent saying they would financially support children in their “early adult years.” About 55 percent of these parents would permit so-called boomerang children to come back and live at home, and 30 percent said they would charge rent. More than 40 percent said they’d pay for their child’s health insurance until they found a job. Parents with employer-provided health insurance can add children to their plans until age 26, under the health-care reform law enacted last year.
The survey also asked respondents about health-care costs and inheritance. About 70 percent said health-care costs were their top financial concern and 56 percent said they’re not counting on an inheritance to help them with these costs or during general retirement.
Those results are similar to an April study by U.S. Trust, Bank of America’s private wealth management unit, said Sieg. That survey of individuals with $3 million or more in investable assets found that fewer than half said that leaving an inheritance is important to them.
“They recognize that their parents’ generation is absorbing a higher health-care cost and they will need their own financial resources to secure their own lifestyles in later life,” Sieg said.
Braun Research, based in Princeton, New Jersey, contacted 1,000 Americans by telephone in June with investable assets of $250,000 or more on the behalf of the bank.