10 Financial Moves to Make Before Your Child Goes to College

Every parent I’ve ever talked to wants to be able to support their child’s college education. After all, you want to give your child all the opportunity in the world, and that’s exactly what college represents. But it’s a big expense and it’s growing. So how can you prepare to cover your child’s education while still paying your bills and saving for your own future?

Here are 10 financial moves to make before your child goes to college that will help your entire family build a better financial future.

1. Remember: Sometimes your needs come first

As much as you want to provide for your child, it’s important to take a step back and make sure you are on solid financial footing first.

The truth is that there are many routes to both obtaining and paying for a college education, from loans, to scholarships, to work-study, to less expensive schools.

But there is only one route to you having a secure financial future: your savings.

Putting yourself first not only ensures that you’ll be able to support yourself later on, but it ensures that your children won’t have to support you. So before you commit tens, or even hundreds, of thousands of dollars to your child’s college education, make sure your own financial needs are on the right track.

2. Get to the real goal

College is the default path, and for good reason. On average people with a college degree earn almost twice as much as those without one and are much less likely to be unemployed.

But before you assume that your child needs to go to the most prestigious (and expensive) college possible, take some time to think about what the real goal is here and if your child would flourish in the traditional four-year college setting. Perhaps a trade or technical school is the better fit.

Talk to your spouse or partner about the kinds of opportunities you’d like to provide. And talk to your child about the opportunities she wants for herself.

Figure out what you’re really working towards before making a huge financial commitment.

3. Evaluate your options

Once you know what you’re working towards, you can start to look at the options available to you.

When it comes to evaluating different colleges, you can look at cost. You can look at specialized programs. You can look at location, opportunity to travel, access to merit-based scholarships, and any other factors that are important to you.

You can also look at alternatives like taking a gap year, traveling, starting a small business, going to trade school, or self-directed or online education.

It’s important to be realistic about what many employers value, which is certainly a college education. But it’s also worth keeping an open mind about what truly matters for your child’s specific goals and evaluating all of your options.

4. Estimate your ‘Expected Family Contribution’

As you investigate the college route, you can start to get a sense of your expected family contribution.

This is the amount you will be expected to contribute to your child’s college education, with the cost above that amount presumably being covered by financial aid (which includes student loans).

You can estimate your expected family contribution here.

5. Decide how much you’re willing to contribute

Your expected family contribution is one thing. Deciding how much you can and are willing to fund is another. And there are a few factors that should go into that decision.

The first is what you can afford to pay. This involves the work you did in Step 1 to evaluate your progress towards other financial goals, as well as a look at your budget to see whether there’s any room to shift things around.

The second is being clear about the things you are willing to fund. In addition to tuition, there are books, room and board, food, fraternity/sorority dues, and other discretionary living expenses. Have a conversation that includes your child about how much those things cost and whose responsibility each expense will be.

The third factor is what you expect your child to contribute, which we’ll get into next.

The goal here is to be realistic about what you can afford and to be clear about what’s expected from all parties.

6. Make sure your kid has skin in the game

Given that you’re talking about your child’s future, it’s not unreasonable to expect your child to help pay for it. In fact, doing so may give him more ownership over the decisions being made, which could lead to better results.

There are many different ways for your child to help financially, from working in the years leading up to school, to working part-time during school, to applying for scholarships and grants. You don’t have to put it all on them, but involving them in the process can be beneficial for everyone.

7. Create and implement a savings plan

With your funding targets in mind, you’re ready to start saving.

The younger your child is, and the more likely it is that he or she will attend a traditional college, the more helpful a dedicated college savings account will be. That’s because the tax-deferral those accounts offer will have longer to work their magic. But if you live in a state that offers an income tax deduction for contributions, they can be helpful even in the years right before college.

Here’s a list of the top 529 plans in the country to help you decide: The 5 Best 529 Savings Plans Anyone Can Use.

And don’t forget that a regular investment account can offer a lot of flexibility. The money can be used for college if necessary, or you can hold onto it and use it for other goals.

8. Get up to speed on student loans

Student loans will almost certainly be an option, and there’s a good chance that they’ll end up as part of your strategy. That’s not necessarily a bad thing either. The value of a good education can be incredibly high, and taking on some debt in order to make it happen can be a smart move.

They key is to make sure it’s done purposefully and with a strong understanding of the consequences. Far too many students are graduating with far more student loan debt than they should have ever taken on, largely because of a lack of knowledge about what they were getting into.

So take some time to learn about the pros and cons of the options available to you, and make a decision based on what you can afford and what your child truly needs in order to get the education she wants. This article will give you a good start: How to Handle Student Loans in 4 Easy Steps.

9. Apply for scholarships and grants

It takes some work, but you may find that your child can qualify for a significant amount of money in scholarships and grants. This can not only reduce your financial burden, but it can also be a great way for your child to help financially without having to come up with a large amount of savings.

Students can start applying for college scholarships can be as early as middle school. At the latest, start preparing for applications in the first year of high school.

Here’s a guide to help you get started: 6 Ways to Find College Scholarships.

10. Plan ahead for your new budget

No matter how much you save, college years can be tough on your budget. That’s especially true if you’ll have two or more children in college at the same time.

If you can, make your best guess at what your budget will look like during those years and start living on it a year ahead of time. That will not only help you get used to the budget, but it will allow you to build some extra savings to help smooth out any bumps in the road.

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