Preparing your child for their college years is an exciting time. Think of it this way: you’ve spent almost two decades feeding them, clothing them, encouraging their talents and independence, and teaching them responsibility. Now you get to send them out on the next phase of their journey and watch them grow and learn even more. But what many parents don’t realize when they start the college planning process is that there are often challenges that come up along the way. Knowing these obstacles ahead of time and preparing for them could save you priceless amounts of time, stress, and money.
1. Communication
Just as with most things in life, clear communication and expectations will make the college planning experience more enjoyable. Your child probably has dreams about where they want to go to school and what they want their experience to be, but those dreams might not be firmly rooted in reality. Make sure you and your child are on the same page and be clear about who is paying for what, how much money is available, and what you expect from your child in terms of contribution. It might help your child if you are honest about your financial situation. Let them see the big picture so they understand the financial implications of their choices. Finally, remember that this is both an exciting topic but also a stressful one, so consider your child’s communication style and find ways to broach the topic without creating more stress.
In terms of communicating with those outside the family, get your professionals on board with your situation. The most common communication error, and one that can be extremely costly is not realizing that there are TWO sides to the college story – college planning AND financial planning. Many times college counselors aren’t aware of family finances and may compile a list of potential schools that won’t work for the family. Your financial advisor (Who should be well-versed in college planning) also needs to know what you are thinking so they can help you best strategize and maximize your accounts.
2. Making The Right School Choice
Making the wrong choice can cost tens of thousands of dollars.
You have plenty of options when it comes to choosing a post-secondary institution: community college, in-state, out-of-state, private schools, etc. It’s easy to get overwhelmed and distracted by all the choices, so start with your why. Why do you want your child to go to college and what do you hope they come out of it with? Make a list of criteria to run each school through so you can make a personalized decision based on your values and circumstances. For each college you are considering, ask yourself if it is a good match for:
- Your finances
- Your child’s strengths and passions
- Your child’s career options
- Expectations for future lifestyle and income
- Other siblings who will be attending college in the future
At College Planning America, we recognize the importance of college choice and have created a college planning system that helps you make an informed decision. We also provide a personal student advisor to guide your child in a customized college search to match their career choice.
3. Knowing When To Start Planning
Most people only start saving for college when it’s right around the corner. In reality, we should start putting money aside as soon as our kids are born, even if it’s only $20 a month. By starting early, you will reap the rewards of compound interest. (1)
And starting early isn’t just about the money. You should take the time to help your child discover their natural giftings and skills and discuss their college dreams and what college might look like in different scenarios. Every school will have different expectations and criteria, such as GPA, extracurriculars, and test scores. The earlier you start, the more prepared you’ll be.
Many people visit schools in the summer and have no idea which of those schools might be a good fit for the student yet. The Student side of the planning process needs to be started before you visit schools so as not to waste time and resources visiting schools that are not a good fit. If you wait until the end, you’ll probably end up rushing around and more stressed out than you need to be.
Ideally, the Parent side of the financial planning aspect of college should start as soon as possible after the child is born, and the student side of college planning should start at the end of their freshman year of high school.
4. Following A Planning Process
Just as 75% of Americans have no written financial plan, most people don’t follow a college planning process. (2) When you don’t have a plan, you just figure it out as you go, putting out fires as they come up and scrambling to stay on top of the many details, applications, and decisions.
This is one of the most important aspects of preparing for college. If you don’t have a set plan in place, you could end up paying tens of thousands of dollars more for college than necessary. Even if you’ve saved appropriately, not following a proven process could hurt your future retirement and saddle your child with loan debt. Working with professionals who know the ins and outs of college planning will provide you with timelines and structure that will make this experience as pleasant and efficient and possible.
Our College Planning Process is a wonderful opportunity to teach kids how to plan and make good decisions. How we, as parents, handle this process could be a crucial teaching opportunity for our kids for the rest of their lives.
5. Understanding Savings Options
We’ve already established the importance of saving early and often, but where do you put that money? The most common methods people use to save for college is through a 529 plan or a Roth IRA. Although these are the two most commonly known, they might not be the best vehicles for everyone. For example, if grandparents are contributing to a 529 for your child, that money could reduce the amount of financial aid the student receives. This is why it is essential to work with a professional who can advise you based on your unique circumstances.
It’s also important to have a goal to shoot for. Even though tuition costs are rapidly rising and it’s difficult to predict what college will cost by the time your child attends, having a goal and a plan to save a certain amount will get you further than having no plan at all. The statistics show us that those who have a plan tend to save regularly and save more. (3)
Finally, having a stable and secure college plan involves proactive risk management. If something tragic were to happen to you before your child graduates college, do you have the appropriate insurance and estate planning in place to provide for your kids’ future?
Take The Next Step
While we can’t plan for every single possible turn life can take, we can look down the road and prepare for the milestones we know are coming. No matter how young or old your children are, college planning is a process you can start now to not only set them up for success but also save everyone a whole lot of headaches when crunch time arrives. If you don’t have a college plan in place, we would love to help you with every step of the process. Click here to take our college planning strategy quiz and email me at dcoen@sageviewadvisory.com or call 800-814-8742 to set up a no-obligation conversation.
About Dave
Dave Coen is a Financial Advisor with SageView Advisory and the CEO of College Planning America. Along with his Retirement financial industry experience, he is a College Planning Specialist. He works closely with individuals and families to provide them comprehensive financial planning that addresses all elements of their financial picture. Learn more by connecting with Dave on LinkedIn.
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(1) https://www.businessinsider.com/amazing-power-of-compound-interest-2014-7