Most parents today consider funding their children’s college education to some extent as one of their key responsibilities. Yet, the skyrocketing cost of higher education, which significantly outpaces inflation, can put a large strain on their personal finances. With this cost set to rise, this responsibility understandably causes parents great concern, especially those with multiple children.
Are you, or do you plan to be, a parent who feels this responsibility? Happily, effective wealth management strategies put into practice today can help you begin to immediately save towards this goal. This can ease the burden of paying for college down the road, and hopefully, free you to focus on other areas of long-term personal finance, such as retirement.
Save More Monthly
Working with a financial advisor to examine both your goals for your children’s higher education and your current financial plan may lead to an increase in your monthly savings for future education costs. It is effective to review your household financial plan and budget at least semiannually. If you do not have either of these, find a great financial professional and start a conversation on these topics. The best financial advisors offer services that aid their clients’ best interests.
Such financial advisors will help you create a financial plan that maximizes your savings, targeting them towards your goals. In the case of your higher education strategy, you can direct a portion of your savings into a 529 College Savings Plan. This plan allows you to invest funds into a 529 account for college tuition and expenses, providing tax-free growth. At Wendell Charles Financial, our friendly and responsive professionals can create a custom 529 Plan designed to help you manage your goals for your children’s education.
Set Aside More Now
Another consideration is to jumpstart your children’s college savings is to set aside an additional lump sum today. Perhaps you have an upcoming bonus from work, or stock shares or mutual funds that you can sell for profit, or an extra source of income? Have you recently come into more money through an inheritance? Consider how you can redirect a portion of these funds into your children’s college savings accounts. If setting aside an additional sum requires you to take funds from 401(k) or IRA retirement accounts, this is not the option for you!
If you plan to partially fund your children’s education, it can also be helpful to teach them the skills of planning and saving for future goals. Do your children work? Have them set aside a portion of each paycheck into their 529 Plan. This teaches your children the value of planning and saving for future goals and creates a valuable partnership with them that helps you both manage important objectives.
You may also consider reducing the actual cost of your children’s higher education. Perhaps your children qualify for scholarships or grants? To start your research, try the websites of the actual institutions your children are interested in attending, as well as The College Board’s “big future” Scholarship Search website. The former will have school-specific scholarship information and requirements, whereas the latter offers aid opportunities from over 2,000 programs adding up to almost $6 billion in funds.
Also, your children could attend a less expensive educational institution for a time. In-state schools typically offer lower tuition than comparable out-of-state schools. Furthermore, community colleges offer opportunities to commute from home while earning general education credits at a fraction of the cost and that qualify at most major institutions. As long as you are not looking to empty your nest after your children finish high school, this can be a win-win situation for the whole family
We Can Help
At Wendell Charles Financial, we offer clients a personal “cost of education” analysis. This financial service focuses on your personal finance as it relates to your higher education savings, giving you a clearer picture of what it will require now to achieve your financial goals later. It is just another part of our commitment to center our wealth management strategies on our clients’ best interests and growth. Click here to download a sample “cost of education” analysis.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Prior to investing in a 529 Plan investors should consider whether the investor's or designated beneficiary's home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state's qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing. Non-qualified withdrawals may result in federal income tax and a 10% federal tax penalty on earnings.