By Abbey L. Henderson, CFP®, RLP®, CPCC®
If you have a teenager at home, you know the importance of good communication. There are so many issues that they have to contend with and they need your guidance and support. But too many parents shy away from talking about college financial planning.
Parents often secretly worry about saving for college but often don’t voice these concerns with their children. Then when their child suddenly announces their plans to attend an expensive private university, the parents come to me in a panic.
They want to help their child’s dreams come true. They’ve often been saving for college, but the way higher education costs are escalating, it’s just not enough. They worry about retirement versus college savings and even wonder if they should dip into their retirement savings to pay for tuition.
Planning for college will go much smoother if you and your high schooler are regularly communicating about it, and that includes who’s going to pay for it.
What? You don’t have to sacrifice your retirement to fully fund your child’s education?
No, and here’s why. Your child has various ways they can finance their education, whereas you can’t take out a loan or find a generous scholarship for your retirement. You have to foot the bill and in the long run, you can be doing your children a favor. If you don’t save for retirement, you may end up being a financial burden on your children in the future.
Here are three key areas to keep in mind when you’re talking educational goals with your kids that will keep you both on the same page.
#1. Help them figure out now what they want to do after college.
As a teenager, it’s the perfect time to explore different career opportunities. Brainstorm with your child and help them analyze their strengths and weaknesses and how that fits with the career of their choice. Talk to them about how they like to spend their day.
Are they okay being at a desk all day, or do they prefer the outdoors? Discuss what will make a career meaningful to them. Do they prefer to work alone or be part of a team? Are they driven by making lots of money, or inspired by being of service to people, or maybe it’s both?
You’re helping your child come up with a vision for their future. Obviously, that vision is going to greatly evolve over time, but having clarity now will help your child make a better decision about their educational goals. There is nothing more frustrating than spending hundreds of thousands of dollars on an education, to discover your child really doesn’t want a medical career – they’d be much happier as a forest ranger!
#2. Discuss how much you are willing to contribute to their education.
Start by breaking down all the costs for each potential college or educational option your child has on their list. This will include not only tuition and books but housing and living expenses if they’re attending school away from home.
If you let your child know, right upfront, how much you’re willing to pay, you’re empowering him or her to make responsible financial decisions as a young adult. Which is not just helpful now, but for the rest of their lives.
#3. Brainstorm options that will help them meet their goals.
Once your child has an idea of their educational goals and knows how much money you’re willing to chip in, it’s time to review the pros and cons of their options. Talk about the value of finding a good fit that offers post-graduate job opportunities, rather than focusing on “brand name” schools.
Could they start out at a local community college near home and save on both tuition and rooming? Are there in-state universities with a great reputation and much lower price tag than a faraway prestigious private university?
As a parent, this is your opportunity to be a role model for balancing the pursuit of a dream with being realistic and setting boundaries. Can they work part-time now to start saving for their future? Which scholarships are available to them? Which student loan options make sense?
It’s also time to help your teen see the value of independent thinking. There’s no need to keep up with the Joneses, especially when it doesn’t line up with their vision for the future.
Communication is Key
As you can see, communication is the key to success when planning for college. And when it comes to retirement versus college savings, don’t forget that retirement wins!
As a financial life planner, I help people make smart financial decisions as they work steadily toward their vision for the future. If you could use some help coming up with a plan for your child’s future or your own, feel free to schedule a complimentary Financial Life Plan Discovery Session with me to learn more.