Tuesday, September 22nd, 2020
Posted in: Education Funding, Financial Planning
10 Tips from our Experts on Covering the Essentials of Planning for College
Parents want the best for their kids. So, when the time comes to prepare for college, it’s only natural to seek the best experience and the best fit for your child – at the best possible school. As the search kicks into high gear, you’ll hear a lot of great things about a lot of great schools, each touting top-notch academics, decked out dorms, (mostly) healthy food, and state-of-the-art facilities. Every college wants to make a good impression – and based on what appeals to you and your son or daughter, the list of top prospects will take shape.
Unfortunately, all those college bells and whistles can come at an astronomical cost. A full-time, four-year college education today at a private college can cost over $200K per student. That means a family with three kids could need $750K -1 million in funds to cover a four-year education for their children. Despite the sky-high price tag, many parents still consider colleges that represent a financial stretch – both for their current budget – and for their child’s future. It’s a short-sighted approach that can lead to devastating long-term financial consequences, making it vitally important to check the “let’s figure it out later” impulse before it’s too late.
That’s why you need to begin educating yourself and your child on the cost of college long before the application process begins. Throughout this two-part blog, we’ll share ten tips on how best to prepare yourself – and your child – for the realities of college education costs. With that knowledge, you’ll be better positioned to set realistic expectations before your child sets his or her heart on a college that exceeds your means and could potentially imperil everyone’s financial future.
Tip #1: Have family financial review meetings with your child.
At the beginning of your child’s junior year in high school (or earlier), it’s time to start scheduling regular family financial review meetings. These meetings will start at a high level, with discussions of your family’s net worth, income, expenses, debts, and other challenges. If you have a financial advisor, consider inviting them to a meeting – or have them prepare a summary of your last annual review meeting to share and discuss with your child. During these meetings, it’s important not to hide family financial challenges from your children. In many cases, they’ll be more aware than you may realize, after witnessing your patterns, conversations, and actions for the entire duration of their lives.
From a practical standpoint, children will benefit from a clear understanding of family finances, and they’ll learn important lessons through your approach to financial challenges. Be honest with your kids – and to the extent possible, let them know that financial challenges are common for everyone, at every income level. By sharing the ups and downs of everyday financial life, you’ll demonstrate that market shifts aren’t the end of the world – and that investing favors those who take the long view.
Tip #2: Talk about future family and financial goals.
While it may represent the biggest financial consideration of your child’s young life, it’s important to place secondary education in the context of your family’s broader financial picture. Take the time to discuss all the family goals and needs that you have to plan for. Aging grandparents, retirement, health care, business needs, vacations, and housing – all of these life demands and dreams will require smart financial planning. By being open about these vital considerations, you’ll give your child the perspective necessary to consider their own goals – and the financial responsibilities they’ll have once their post-secondary education is complete.
Tip #3: Review the cost of college with your child.
In an effort to build your child’s awareness of the cost of higher education, choose a college he or she is interested in – and run detailed one- and four-year expense scenarios using realistic tuition, room, board, and inflation assumptions. By walking through this exercise, your child will gain a clearer picture of how college costs work – and how they add up. Next, visit with a financial aid office at a college, or set up a conference call to review the process around financial aid. Have your children talk to other college students they know from your town to learn how they handle their college-related financial challenges.
Tip #4: Explore all options for a great college education.
While it’s tempting to tie future success to a degree from an esteemed college or university, public universities, community colleges, online universities, and non-traditional degree programs often offer high quality, cost-effective alternatives capable of opening the doors to a lifetime of opportunity. Some state institutions also offer reciprocity programs with other state universities and colleges, allowing out-of-state students to pay in-state tuition rates. And for students with an appetite for exploration, exchange programs offered at state institutions provide opportunities to study abroad and expand horizons without breaking the bank.
Tip #5: Let your child know his/her part in paying for college.
When your kids are part of the college cost conversation, they’re better able to understand that post-secondary education is an investment that comes with sacrifice – not a given. The best plans are those developed and embraced by both parents and their children, where everyone understands the practical realities of college funding and embraces their responsibility for making it a reality. This shared strategy is integral to successful college planning and paves the way for smarter financial decisions once college is complete.
Check back soon for Part II of this post, where we’ll share five more tips on coping with college costs – and communicating expectations with your kids. And if you have any tips you’d like to add, send them our way.
Stay tuned for Part 2 coming soon…
Would you like to learn more about Education Funding and how to plan and strategize for education costs? Connect with a Richard Brothers financial professional located in South Portland, ME today to discover how you can secure your future with wise financial moves.