Most parents want more for their children than they had. This includes a good college education. However, as the cost of a college education continues to rise, it becomes more out of reach. For this reason, it is important to plan and save for college so that you can afford to help your children reach their goals. Planning financially for college might be one of the biggest stressors for parents. How much do we need? When should we start? Have we waited too long? Take a deep breath, mom and dad. These are all questions that every parent asks, and unfortunately, no one has a definite answer for you.
According to an article in US News and World Report, the cost of a 4 year degree may reach over $205,000 for public institutions by 2030. That may sound bleak, but there’s hope! Making a plan now for your child’s educational future can go a long way in helping set them up for success. So, where do you start?
One of the biggest mistakes many parents make is not making a college plan soon enough. However, time can make all the difference when saving for college. It is never too early to start saving for your child (or future child’s) college fund. Some parents choose to begin college planning at the same time they begin family planning. While this is the most proactive plan to make sure you will be prepared to pay for college, putting aside a small amount of money each month from the time your child enters kindergarten is also effective. This will give you 12+ years to create a substantial college fund by the time they graduate from high school. Make a realistic plan for how much money you believe you can set aside each month, and you will quickly see that financial planning for college just got easier.
There are also 529 savings plans which are sponsored by your state. This helps you to save money tax-free as long as you end up using the funds for educational expenses. Each state is different but you should at least look into these plans. There are also 529 prepaid plans which allow you to save for college at the current tuition rates. These can only be used at certain schools, though it can be quite helpful to pay for a lower tuition.
Many hands make light work, and college savings don't have to fall solely on the shoulders of parents. Though parents want to help, it is not just your responsibility to pay for college. When your children get older, you can help them find jobs. They can put some of that money toward planning for college. Many children who are interested in going to college can help pay for their own education.
While we all hope that our child will be able to pay for college with scholarships, it is important to realize that competition for available scholarship money is tough. There are many scholarships based on your children’s abilities—whether they are academically gifted or athletically talented. In addition, there are also scholarships available depending on their specific area of study. Most of these scholarships, grants, or other tuition aid do not need to be paid back. For this reason, you should look into as many of these as you can. Many colleges offer their own private scholarships. If your child is interested in one college over another, it may be worth it to look into different schools based on the financial aid they offer. They might get more financial aid at a certain college, making it even more important to pick the right one. Nevertheless, we recommend developing a plan that does not include scholarships, so you can plan in more concrete terms
Prestigious colleges and universities are alluring for many reasons, but that doesn't always mean that they're the best choice. While a widely-recognized university may have many upsides, financially speaking, they can be a sizable burden on students and families. While affordable colleges are mostly unrecognizable. As competition to prestigious colleges, they offer an affordable education. A quality education with less debt is too tempting to pass up. As a result, these colleges attract budget-conscious students. Other students choose affordable education after evaluating colleges. However, there are two disadvantages. Out of state students attending state colleges will pay the same amount as a private college. Therefore, remaining in your state of residence is crucial. Second, affordable college students must work harder to compete on the same level as elite graduates.
There is no right or wrong answer. The best college is one the student loves since he or she will be attending. Moreover, we do advise parents and students to communicate about prestige versus cost in college education. Our hope is students and parents end the conversation in agreement.
There are many types of financial aid available for those who want to go to college. Financial aid is largely determined by need, so be prepared to fill out some paperwork about your finances. You may need to reduce some of your assets to ensure that your children will get the financial aid that they require. There are many variables that affect financial aid, including
Income
Savings
Ethnicity
Cost of attendance
Family size
Being aware of current guidelines will help you in creating your college plan.
Sometimes it can feel like college planning requires a degree in finance, as many parents quickly get overwhelmed trying to make plans for their children’s futures; this is where it can be extremely beneficial to consult a professional financial planner. A professional can help you to determine how much you should, and can, realistically save, and where you should put this money to get the best return on your investment. If you have been feeling overwhelmed trying to make a financial plan for your child’s future, contact us to learn how we can help you with college planning.
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