Learn about the different types of college savings plans
Be open and honest with your children about college saving and funding alternatives
Encourage your children to take an active role in the process by taking part-time jobs and pursuing scholarships
College is an expensive proposition, so having a plan to pay for your kid’s education—even when it’s still far away—is paramount.
First off, consider a college fund or some other educational investment plan such as a 529 or Coverdell Education Savings Account (ESA). It’s probably best to begin planning as soon as possible and get your child involved as well.
As you begin your family, or even earlier, think about how you’re going to pay for your child’s expenses through the formative years, in addition to thinking about a college investment fund. Once your children are born, don’t wait too long to start saving. The sooner you can put your investment plan into action, the more time you’ll have for potential growth.
Modeling good behavior, such as letting your child see you actively putting money into a college investment fund or 529 plan, is one idea. Even for parents who automatically transfer savings to an account, showing how this is done gets children involved. Also, start having conversations about budgeting and what type of school you think the family will be able to afford with the savings you expect to accumulate.
These conversations can also have a secondary benefit: They can help your child better understand the preparation and financial discipline that go into making an important purchase. This might put them in better shape later in life when they need to start saving for a car or home.
The discussions need to ramp up as kids enter high school. You’ve already set the stage by talking to your child about finances and how money works, so now you can help guide your kid’s choices and vision. Be realistic about paying for school. When making the list of “dream schools,” consider making colleges’ overall value part of the equation.
By the time they’re in high school, students can become active members in their education investment plan. In addition to savings, you should both explore other avenues for finances. Kids can get a part-time job and save the money; look at academic and athletic scholarships; talk to grandparents; and potentially take out loans. Note: there are more academic scholarships than athletic scholarships available, and it’s important to remember that actively researching scholarships can take quite a bit of time.
Grandparents, too, might be willing to contribute to an educational investment plan. For example, some choose to contribute to college savings instead of, or in addition to, holiday or birthday gifts.
Work toward a degree—and some potential tax savings.
Work-study programs or attending a community college before a university can also help ease the financial burden. Sometimes going away to a big school can be emotionally overwhelming at 18, so community college can help with that life transition—and save on costs as your child works toward earning a bachelor’s degree. Don’t worry about how it looks on a resume; the diploma for that BA is the same whether or not your child started out at community college.
The hardest part may be getting started. Personal finances tend to be among those “taboo topics” we wish to avoid. This can be especially true when talking finances with your children. For example, you may have made some poor financial choices when you were younger that you don’t wish to disclose. Or, you might feel guilty when placing financial limits on kids’ education costs; it might feel like you’re quashing their dreams.
But there are effective ways to get the ball rolling. Consider asking them about their dreams, and compare them to yours (and yours when you were their age). Talk about your retirement and how their financial choices might impact your own dreams. You can then discuss your collective resources and set real savings goals. For example, if your child has a part-time job, how much should she be saving out of each paycheck?
Managing money as a family can be a team exercise that requires responsibility and discipline, but one that can help every family member pursue their dreams. It all starts with a plan.
Education Resources, All in One Place
The cost of college is high, but an education account can help you invest toward paying for your child’s college expenses down the road.
Learn about education account types available to you that can help you plan for college or any education goal.