When developing financial plans for couples, we discuss their priorities on what they want for their children. While providing the basics is a given, most parents want their children to have more.
They want to send their children to private school and educational summer camps.
They want to have frequent family vacations – a ski trip and a beach trip.
They want their children to excel in sports and go to championship games.
They want their children to eat organic food and wear fashionable clothing.
They want their children to attend the best college.
They want their children to have a lavish wedding.
They want to give their children money for a down payment for a home.
They want ….
The list goes on and on. Maybe some of the things you want for your children are on this list.
There is nothing wrong with wanting the best for your children … but the term “best” is subjective. You have control on defining it.
One of the hot topics is paying for college education. While many parents envision paying 100% of college expenses, reality may limit how much they can really afford.
According to The College Board Annual Survey in 2016, the average annual cost for a four-year public college was $20,090. The average annual cost for a four-year private college was $45,370. This cost included tuition and fees, as well as room and board. It excluded all the extras you may need to pay, such as study abroad or social activities.
Many parents are caught in the sandwich generation. This term means parents are paying for their children’s college and paying for long-term care for an elderly parent while saving for their own retirement.
Sending their children to the “best” college is redefined to being one they can afford. There are loans for college education but there are no loans to pay for retirement.
Before deciding on the “best” college follow these seven guidelines:
1- Determine how much you can afford to pay without sabotaging your retirement savings. If you’re ten years away from retirement, this step is vital for your retirement readiness. Work with a Certified Financial Planner™ professional who will share different saving strategies.
2- Set clear expectations with your soon to be college student about how much money you can contribute to their education and extra curriculum activities. If you have a hard time with this step, think about how you approached buying them a car. Did you have them pick whichever car they wanted or did you set financial limits on what you would pay?
3- Help your college student develop a budget so they are not always calling you for additional money. Make this budget easy for them to follow by finding an app they could easily use on their smartphone.
4 – File your Free Application for Federal Student Aid (FAFSA) even if you don’t think you will qualify. Many colleges use this information to assess whether you are eligible for scholarships or grants. Treat the “published” college cost similar to the “list” price of a new vehicle.
5- Begin researching as soon as possible (preferably when your child is in middle school) different scholarships and grants. By starting early, you’ll have time to meet eligibility requirements.
6- Before co-signing on an educational loan, understand your liability and impact to your finances.
7- Encourage your college student to explore Federal loans instead of private loans. Federal loans have options for repayment, deferment, or forgiveness.
Paying for college tends to be a priority for many parents. Unfortunately, we often get caught up with life and miss many planning and saving years. If you’re part of the sandwich generation, pay attention to your own needs for retirement and long-term care. If your children are still young, work with a Certified Financial Planner™ professional to determine the best saving vehicles for financial flexibility to provide all the wants you want for your children.
ABOUT THE AUTHOR:
Niv Persaud, CFP®, CDFA™, CRPC®, is the Founder of Transition Planning & Guidance, LLC. Life is more than money. It’s about living the lifestyle you want and can afford. For that reason, Niv consults with clients on money, life, and work. Her approach capitalizes on techniques she learned throughout her career, including as a management consultant, executive recruiter, and financial advisor. Her services include spending plan, financial plan, divorce financial review, life strategy, and professional progression. Niv actively gives back to her community through her volunteer efforts. She believes in living life to the fullest by cherishing friendships, enjoying the beauty of nature and laughing often — even at herself. Her favorite quote is by Erma Bombeck, “When I stand before God at the end of my life, I would hope that I would not have a single bit of talent left and could say ‘I used everything you gave me’.”