One of the most financially savvy gifts a parent or guardian can give their child is to send them to college. Even with student debt, the difference in a college graduate’s lifetime earnings vs that of someone with only a high school diploma is substantial. This wage difference spread over 40+ years in the work force will provide your child with more wealth over the long haul. According to the Census Bureau, figured in today’s dollars, those life-time earnings might range from $1.8 million for education majors to $3.5 million for engineering.
Unfortunately, many parents or guardians wait until the last minute to begin thinking about how they are going to pay for their child’s college education. The reality is life gets busy. And let’s face it … you’d probably have more fun going to the dentist for a root canal than sitting at your dinner table filling out seemingly endless forms and applications.
All too often, many parents take the quick and easy way out. They raid their retirement accounts at the last minute to pay the bills. They rationalize this in a multitude of ways:
- We make too much money therefore we won’t qualify for loans or grants
- We plan on working until we’re 70 so we have plenty of time to make up the difference
- Who are we to keep our child from going to college?
That simple and easy act of using retirement funds to pay for college jeopardizes a secure and confident life in retirement and turns it into one of deprivation, fear, and stress.
So, what is one to do? Take a deep breath and get going. Many centuries ago, a little known Chinese philosopher Laozi coined the well-known phrase “a journey of a thousand miles begins with a single step”. This blog series is designed to enable you to take those first few steps with confidence. Having a map and following the plan can help in the process. Future blogs will take a deeper dive into the specific activities that you will need to work through in order to make sure you and your child are financially prepared for college.
As an introduction to our college planning series, here are the seven steps to take to keep your money and your sanity:
- First, understand your child’s skills and career goals then develop a plan for getting them into college in the most cost effective manner as possible. This should include discussions on both the hard facts such as comparing costs vs benefits, as well as the emotional considerations such as interests, goals, and “fit” of educational options.
- Maximize your school’s resources — specifically your school’s Guidance Counselor, teachers and advisors all of whom want your child to succeed in school and in life.
- Understand your financial aid options and how your assets are used in calculating your Expected Family Contribution (EFC), a key component in determining how much financial aid you will be awarded.
- Understand employer and employment options that could be available to you and your family to help lower your expenses.
- Develop a savings plan, because the more you save, the less you have to borrow. You don’t want your newly minted college grad trapped in a debt bubble that could limit his or her financial future.
- Understand your borrowing options and the benefits and costs associated with each option
- And, as always in this digital age, watch out for scams … because there are plenty of them out there.
In the end, sending your child to college is a significant investment. Do some smart, educated research to help your child start his or her career on the right foot AND to help you keep as much of your hard earned wealth as possible so you can start your retirement on the right foot as well.