It seems that part of parenting is imagining what your kid is going to do when they grow up. A child who enjoys tinkering may be destined to be an engineer. One who loves to put on a show might become a director one day. We’re always on the lookout for the spark that will determine where a child will go in life. But we also know that some form of education beyond high school will often be the way they’re going to get there.
When my daughter started elementary school, I noticed that parents had a whole variety of ideas about how they were going to afford higher education. Some parents would reflect on their own experience and assume their child will pay their own way by juggling a job and schoolwork. Others wanted their kid to attend two years at a community college to save money. Many people figure student loans are inevitable and hope their financial situation will change by the time high school graduation is on the horizon. But a lot of these plans simply amount to putting off saving and hoping for the best.
Other parents I’ve encountered thought they could position their child for generous scholarships. Perhaps their offspring would take up an activity, like robotics or the bassoon, or a sport, like lacrosse or fencing, that will get the attention of college admissions officers. There’s also the traditional method of parents demanding high grades and stellar SAT scores in the hopes of earning more merit aid. The fact is most college-bound kids are not getting lavished with hefty scholarships. And some kids decide to take a different route, like learning a specialized trade.
More money means more options
One way or another, the families we know were able to send their children to college if that’s where their path was leading them. But some had to make hard choices about whether they could realistically afford their child’s favorite school. When you’ve got the funds to support your child’s dream, they have more options. Maybe the in-state school is a lot cheaper, but your child has found a program a few states away that really feeds their passion. You don’t want to crush their dreams for lack of money.
Saving for college means giving your child more options when the time comes to choose a school. More options to study what they want, where they want, without missing out on an enriching campus experience. By starting early, you can build a healthy fund that can minimize—or even eliminate—the burden of student debt. Here’s how it works:
Start young. When your child is born, you’ve got 18 years to save for their post-secondary education, whether that’s college or a trade school. When they enter high school, you’ve got four. Money builds on itself the longer you have it invested, so the earlier you start, the more money you can accumulate.
Save tax free. 529 savings plans allow you to invest tax free, and if your child decides not to further their education, you can transfer the money to a sibling or grandchild. You can even use it to further your own education. Every state offers a 529 plan, but you don’t have to use the one in your state. 529 plans can cover tuition, books and supplies, and even housing expenses.
Prioritize. Start with a plan to put away regular amounts of money in a designated higher education savings account. Then take a look at your spending choices to see if there are other sources of money that can help you build that fund. For example, an inheritance or work bonus can be put away to boost your savings. The point is, don’t wait.
When my daughter started kindergarten, her grandfather opened 529 plans for each of his grandchildren. By the time she was ready for college, there was enough saved so she didn’t have to worry about the cost when she was looking at schools. So now for my last piece of advice: If grandparents are contributing to a college fund, be sure your child thanks them often for giving them such a generous opportunity.
Wherever your kids—or grandkids—are on their journey through life, make a plan to talk to your financial planner about investing for higher education so they have options when the time comes.
Please contact us at 206.217.2583 or firstname.lastname@example.org if we can assist you or someone you know with financial planning.
Liz is a Late Boomer in the sandwich generation who started an independent writing and brand consulting practice after years as a senior marketing executive. She lives in Seattle, Washington. Her mother lives nearby and her daughter comes home during college breaks.
The foregoing content reflects the opinions of Liz Behlke and is subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. Past performance may not be indicative of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns Securities investing involves risk, including the potential for loss of principal. There is no assurance that any investment plan or strategy will be successful.