Involve Your Child in the Finances of College
If the time is approaching for your child to head off to college, now is the perfect time to bring him or her into the discussion about how to pay for it. By walking through the steps together, you’ll help your son or daughter understand the overall expenses and learn valuable fiscal skills for the future, especially the importance of goal-based saving.
Here are five steps to get your child involved before mailing in that acceptance notification and deposit:
1. Start with a conversation. Before your child begins applying for college, have a discussion about finances. A good time to have this conversation tends to be during the student’s junior year of high school.
When you sit down, ask your child about his or her goals. Talk about expenses for school as well as who will be covering costs or how they might be split. If you or other family members have contributed to a 529 plan or Coverdell Education Savings Account, show them to your child and go through the details of how the funds can be used.
2. Set a budget. As a family, consider setting certain guidelines and limitations for the college experience. Perhaps you have a certain dollar figure you’re prepared to pay or agree to cover the cost of tuition and room and board but ask your child to pay for his or her entertainment expenses while on campus.
Having those discussions may prevent disappointment. If your son or daughter gets accepted into his or her dream school, for instance, but later learns the family won’t be able to pay for it and doesn’t want to take out loans, the reality could be difficult to face.
3. Look at financial aid packages together. Fill out and submit forms for financial help, such as the Free Application for Federal Student Aid (FAFSA), with your child. Learn more at https://fafsa.ed.gov/. To identify additional types of financial aid that may be available, visit https://studentaid.ed.gov/sa/.
Some universities have a net price calculator on their websites. With this tool, you’ll be able to see what the overall cost for the school is and then subtract any financial aid packages available to identify what your expected expenses will be. Once you start receiving acceptance notifications, go through aid packages with your child to compare and contrast them so that you both have a clear vision of what the bottom line is and how different aid options are treated.
4. Think about work. If you want your child to be responsible for paying for part or all of their schooling, a part-time job may be a good fit.
As a family, you’ll want to decide if it makes sense for your child to work while he or she is at school or only during summer and winter breaks. If certain scholarships require your child to attain or keep a certain GPA, you’ll want to weigh the time spent away from academics against the amount of money he or she will earn by working.
In addition to helping cover college expenses, employment can offer other key benefits for your child, including the chance to manage an income, build a strong work ethic, and grow in self-worth. If working during the school year will put too much of a strain on your child, set savings goals together for his or her summer job.
5. Understand scholarship possibilities. If your child wants to attend a school that doesn’t fit into the budgeted amount you planned to spend, consider sitting down to talk about the situation. It may be time to look at other options, or your child may want to increase his or her efforts to identify and apply for scholarships to help cover some of the costs.
The site TuitionFundingSources.com, sponsored by Wells Fargo, provides a database of scholarships available. After looking through the options together, help your child set up a schedule to apply for ones that are the best fit, paying close attention to deadlines and other requirements. Some scholarships involve writing an essay, but the rewards offered could make the effort worthwhile.
Please consider the investment objectives, risks, charges and expenses carefully before investing in a 529 savings plan. The official statement, which contains this and other information, can be obtained by calling your financial advisor. Read it carefully before you invest.