For many families, college planning consists of:
- Saving as much for college as we can
- Hoping it’s enough money to meet our children’s college goals
- Waiting until high school to learn that it probably isn’t enough
While this might be oversimplifying the process, it does seem that a lot of families treat college planning like a ‘save first, plan later’ process. There are a couple of concerns with this approach, which don’t normally manifest themselves until later in the planning process. By this point, it’s too late.
What if there was another approach? What if your college planning started much earlier? In addition to saving, what if you decided to sit down and think about your eventual college conversation with your children?
Let’s take a trip into the future. Let’s think about that conversation you’re having with your children. It doesn’t matter if it’s one year, several years, or a decade in the future. Just put yourself there, and imagine how your conversation would go.
What types of questions do you think your kids (or yourself) will have? If your children expect to look to you for leadership, they might think that you’ll have developed a philosophy on how college planning should work. And you’ll have a philosophy, whether you intended to or not.
With that future conversation in mind, below are five questions that you should ask yourself today. There are no right or wrong answers here, just answers that should match your approach and attitude towards college. If you think about these questions, odds are that your future conversation will be a more productive one.
College Planning Question #1: How Much Skin Should My Kids Have in the Game?
There are so many ways you could go with this, and it’s possible that you change your mind several times as you learn more about college planning. Below are some examples that might help you answer this question:
- It’s the parents’ responsibility to fund college
- We’ll give you XXX, and you’re responsible for the rest
- Let’s collaborate & work together on this
- Who takes the lead on the collaboration?
While your own college experience (and your parents’ approach) might help you shape the answer, it’s important to realize that your children want you to establish clear expectations. If you think of college planning as a negotiation of roles and responsibilities, this question helps you frame your beginning negotiating position.
College Planning Question #2: When Do We Plan to Engage Our Children?
One of the most important things you can teach your children is responsibility. And college is a big responsibility. However, there’s also a point where you say, “Let’s just let our kids be kids!”
The important thing here is that you need to find the right balance. Teaching your young children about their relationship with money is a great first step. Also, this can be done much earlier than college discussions. If your children are responsible with money, then having a discussion about college becomes a lot simpler, because they already have that perspective.
Keep in mind one thing: Everything you do is a learning moment for your children. They’re going to emulate our lifestyle, at some point. Shaping our own behavior so that our children learn the right lessons from our example will also help the conversation.
Because we will set expectations…even if we don’t mean to.
College Planning Question #3: How Much Are We Planning to Save?
This question is as open-ended as the first one. The range of right answers is just as infinite. However, it is important to develop your savings philosophy as early as you can, and stick with it. Below are some examples:
- As much as we can: Many people try this at first, and find out that there is always something more important (or urgent). This usually doesn’t work too well, especially if you have to explain to your children why so many other things were more important than consistently saving for college.
- Set aside a certain amount on a regular basis: This approach demonstrates consistency and discipline. Perhaps you want to reach a goal, or perhaps you’re contributing what you can (or feel like you should). However, it allows you to tell your children the story about your savings approach.
- Annual amount
- Monthly amount
- We want to reach a certain savings goal: This is perhaps the most difficult one. It’s important because college savings goals are about projecting two distinct and unknown variables, investment results and college costs. You might do one of two things:
- Achieve the investment results you wanted, but miscalculate college costs
- Properly calculate college costs, but miss your savings goal
However you plan to start your savings plan, it’s important to remember that time is your friend…but not if you procrastinate. There are plenty of college savings vehicles that can help you grow money over time, but not if you don’t start.
College Planning Question #4: What Type of Savings Vehicle Are We Going to Use?
Most people probably default to 529 college savings plans because they have the broadest flexibility. However, there are plenty of people who have started another plan, such as:
- Prepaid Tuition (a form of 529 plan)
- After-tax accounts
- Coverdell Savings
- US Treasury Bonds (interest earned from qualifying bonds can be used on a tax-free basis for college-related costs)
Whatever you decide, you should think carefully about the options. Also, don’t forget about the post-9/11 GI Bill. Transferring unused benefits to your children can be a great way to help bridge that gap. However, you need to consider your service’s eligibility requirements and plan accordingly.
College Planning Question #5: What’s the Return on Investment?
This is a very polarizing question, especially for those who believe in the personal growth that happens when you’re at college. However, with the skyrocketing costs of college tuition and the increase in underemployed Americans, it’s a question worth considering.
Also, this isn’t going to be a question you figure out yourself. It’s the one that you should ask your children when you’re exploring what’s possible. This is the question that, if asked in the correct manner, can help lead your child to a well-grounded and informed approach toward their career.
The typical approach to this question is: “Is it worth going to a $XX,XXX per year private school just to end up being a (fill in the blank low-wage earning job)? It’s not really fair to ask such a question to someone who truly wants to pursue a career that is generally underpaid…think about our teachers, nurses, police officers, etc.
However, let’s reframe that question: “If you’re going to become the best teacher you can be, how much money should you spend to do so?” If you go by the rule of thumb that your total student loans shouldn’t be more than your first year’s salary, your child now has a basis on how to approach college shopping.
Of course, your child might not have a career goal yet, but will figure it out as they go along. If that’s the case, this is a good way to help nudge them into that community college or other low-cost alternative.
Having the military (or other employer) for their college is a great way to maximize that return on investment. Keeping college costs in check is the single biggest takeaway from my college experience.
While you’re not going to solve all of your college planning questions today, it’s important to take that first step towards doing so. If you’re able to consider your philosophies, you’ll be in a much better position to help your children as they develop their approach.
What college planning question do you plan to explore with your children? I’d love to hear your college planning question in the comments section below!