When it comes to applying for college, much time, money and energy is focused on getting our children and grandchildren into the best schools possible. Test preparation, tutors, college guidance counselors, summer programs, leadership activities…the list is endless. And we do want our kids to reach for the stars and have every possible opportunity, but being aware of financial constraints as your children and grandchildren go through this process, is critical and should not be overlooked or be set aside to be “figured out” once they are accepted at their dream school.
We all know that the price tag for a college education is steep, When you consider that costs include much more than tuition, the four-year cost of an instate school could cost $100,000 and may be as high as $250,000 plus for an elite private school. For parents or grandparents who plan to send two, three or four children to college, this can be a daunting proposition. How can you save for college while also ensuring that you will have adequate resources for retirement and adequate cash flow to fund “life” while your children are growing up? This dilemma is further compounded when you consider that people are living longer, the duration of “retirement” is longer and that fewer and fewer people have income sources, like pensions, that they can rely on in retirement.
The answer is that it doesn’t have to be an all or nothing proposition. Parents and grandparents can allocate funds for college while still saving for their own retirements. As a result, a child’s education may not be fully paid for and the child may need to rely on other options to subsidize the difference. This is not something that a parent should be ashamed of or cause them to feel that they failed their child. But it is of paramount importance that it be explained to your child early on in the college selection process. Look at it this way…if you can only afford a $500,000 house, you would not go house-hunting and look at homes in the $1,000,000 price range. The same should be true when it comes to a college education.
As parents, regardless of how much of the college bill you can foot, helping your child understand their constraints as well as their options, can be quite valuable. Student loans, financial aid, 529 plans, scholarships and tax breaks all need to be considered when devising a college funding plan. Understanding how all the options can work together can prove to be a significant opportunity. The advice you provide your child when it comes to the college selection process has the potential to make a huge difference to their financial well-being upon graduation. And making diligent, realistic, and purposeful decisions as it relates to providing for your own retirement will help to ensure that your personal goals do not need to be sacrificed. It is all about setting realistic expectations from the start.