How Bad Is America at Saving for College?

Parents are saving more, but tuition and fees are rising.

A piggy bank on top of a stack of books, good for saving for college theme

With college tuition and related costs rising quickly, parents should plan to open a 529 account plus explore a slew of other saving options.

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Whether your child is seven months old or 17 years old, you're probably thinking about what you need to save for his or her college education. Or maybe you're trying not to think about it.

The good news is that while college is expensive, it's still worth saving for, according to a New York Federal Reserve study released Tuesday. It concluded that both associate and four-year degrees are still worth the money, calculating the return on investment at 15 percent for current graduates.

In the United States, if you were able to look at every family's college fund, you'd find the average balance is $15,346, according to the "How America Saves for College 2014" report from student lender Sallie Mae.

That's 30 percent more than the $11,781 average balance of college funds last year. Clearly, many of us are doing better than during the Great Recession years when college savings accounts took a major hit.

[Read: 5 Ways to Save for Your Child's College Education.]

To break down the numbers further, for families with teenagers, the average amount saved is $21,416. If your children are between ages 7 and 12 and you have $16,498 saved, you're in the average. For parents with kids under 7, the average is $10,282.

The problem for some parents is that the average cost of tuition and fees at an in-state public college during the 2013-2014 academic year was $8,893, according to the College Board. So that $15,346 in savings will only pay for about two years of college, based on the most recent academic year.

And if you have two or three teenagers and $15,346 saved, you have even less to go around.

You’ll have an even tougher time if you want to send your child to a private school. The average cost for tuition and fees at a private college during the last academic year was $30,094.

It isn't just the tuition and fees that are high. Many parents forget to budget for room and board, college supplies and books. The College Board reports that the cost of tuition, fees, and room and board at four-year public colleges has increased by more than 45 percent in the past decade, from an average of $12,304 in 2002 to $17,860 in 2012. If your child wants to go to a private school, it's often double that, according to the College Board.

And the less you save, the more you or your kids will probably borrow. In 2012, 60 percent of students graduated with debt, averaging $26,500, according to the most recent College Board data.

Meanwhile, the average starting salary for class of 2013 college graduates was $45,327, according to the National Association of Colleges and Employers. So if your child has $26,500 in student loans and earns the average salary or less, it will take a while to pay the loans off.

But it's not all bad. The New York Federal Reserve study concluded that an undergraduate with a bachelor's degree can expect to earn around $1.2 million more than someone with only a high school diploma. Someone with an associate degree will, on average, bring in $325,000 more than someone with a high school education.

Suggestions for saving. Obviously, opening a 529 account, an education savings vehicle operated by a state or educational institution, is a must.

Beyond that, experts generally say you should:

Be realistic. Terry Seaton, a financial planner and certified public accountant in St. Augustine, Florida, says you should set a "savings goal that you think you have a decent chance of achieving. Many parents see the high cost of college and get discouraged, think it's hopeless and don't save anything. Better to save a portion of the college cost than nothing." 

Seaton says your kids should also be realistic about college. “If you can only afford the local state college, they shouldn’t be planning on Ivy League," he says.

Get into a routine of saving. Seaton suggests setting up an automatic payroll deduction or automatic checking-to-savings transfer to fund the college savings account every month.