Let’s get straight to the steps!
Create a solid financial footing for yourself
No matter how much your kids may mean to you, you must not support them at the cost of your own financial well-being. Hence, it’s important to create a solid financial footing for yourself first before thinking of spending any money on your kids’ college education.
In fact, your kids can obtain and pay for their college education in several different ways:
- By opting for student loans
- By earning scholarships
- By going to less expensive schools
- By studying and working simultaneously and more
But for you, there’s only one way to secure your financial future, and that is by saving and/or investing today. Putting yourself first in this way will not only help you support yourself in your later years, but also ensure that you don’t have to depend on your children for anything.
Decide the extent of your contribution
This task will become much easier if you do your work well in the step detailed above. It basically comes down to your affordability keeping your own financial footing in mind.
You must figure out what all you can fund exactly. Please note, it’s not just the tuition fee, there’ll be other expenses like room and boarding, books, sorority/fraternity expenses, general living expenses and many more. You’ll need to talk to your kid about the exact ones and which ones you’d be willing to bear. Thereafter, you’ll need to discuss the contribution made by the kid himself/herself.
The whole idea is to be as realistic as possible about the financial obligations of both parent/guardian and the child.
Ascertain the actual goal
College education is considered the default path for almost every American student because anyone having a college degree earns almost twice the ones who don’t. However, before you write that check to send your kid to the most expensive and prestigious college in the US, take a step back and think about the actual goal. Are you sure that your kid will do well in the conventional four-year college set up? Or is a technical or trade school a better fit for him/her?
Take your spouse and child into confidence and have a healthy and constructive discussion about it first.
You must know the actual goal before making any major financial commitment.
Evaluate various options
Once you’ve worked out the actual goal with your family, take a look at the various options available to you. When evaluating colleges, you must pay attention to the cost, type of program, location, travel distance, scholarships and other important factors.
Also pay attention to alternatives like online education, investing/learning in/from a business, attending a trade school, taking a gap year and more.
Although employers give a lot of weightage to college education, you must keep an open mind about the specific goals of your children, and only then evaluate the different options available.
Ensure that the child also understands and assumes the financial responsibility
Considering that it’s your child’s future that you’re trying to create, it’s not unreasonable to expect him/her to contribute to it too. In fact, paying for his/her own education will make him/her more responsible and give him/her more ownership of the decisions.
Your kid can contribute in several different ways, starting by doing some part-time work during the years leading up to college or applying for grants and scholarships. Although there’s no need of putting it all on him/her, his/her involvement in the process can be highly beneficial for everyone involved.
Put a savings plan in place
Once everything detailed above is done and the funding targets become pretty clear, you must start saving money for your kid’s college education. If your child is still very young, you must open a dedicated college savings account for him/her as it’ll be most helpful in providing him/her with conventional college education. This is because the tax-deferrals offered by such accounts will get more time to deliver their results. However, if the state you live in offers income tax deductions for certain education contributions, they can be helpful even during the years leading up to college admission.
You may even open a normal investment account if you want as it’ll offer plenty of flexibility. You’ll be able to use the money for both college as well as any other life stage goals.
Learn as much as you can about the student loans
Student loans are most likely to be a part of your overall college funding strategy for your kids. That’s not bad either because good education comes at an incredibly high cost these days, and incurring some debt to make that happen can indeed be a smart move.
However, what’s important here is that you do it with a proper understanding of student loans and not just because there’s no other alternative. United States today has a great multitude of students who’re graduating with stupendous amounts of student loan debt on their shoulders, much more than they should’ve actually taken on, mostly owing to a lack of understanding about the nitty-gritties of student loans.
Therefore, take out some time and acquaint yourself with all the pros and cons of the funding options in front of you. In the end, the decision must be entirely based on the actual needs of your child and a practical assessment of your affordability.
Make use of scholarships and grants
Although it may take some work, it’s not impossible that your child may qualify for a major sum of money in the form of college scholarships and grants. Availing this option can not only be a lifesaver when it comes to the overall financial burden, but can also be an excellent means for your child to help his/her cause financially, without making you use a major chunk of your savings.
Such college scholarships and grants can be applied for right from the middle-school years. At the latest, your kid must prepare for such applications during the first year of his/her high school.