As we have been communicating, life centered financial planning is the foundation of how we serve our clients. Money is important but for virtually everyone, money is a mechanism or tool for the most important things in their lives such as loving relationships with family and friends, great experiences and a living a life of meaning and purpose through work, faith, passions, and serving. At the top of that list usually is our families and for those of us who are parents giving opportunities to our children is something that is very important to us. It certainly is for me and Donna. Both of us grew up in circumstances where our families struggled economically and as a result we felt our chances were limited for education and had to take different paths. When we had Jacob and Ava, their education was a top priority for us because we wanted to give them options. We wanted them to be able to be their best selves and find their unique abilities and potentially find careers that are fulfilling to them. We are not unique in this desire. As I talk to people, helping their children particularly with education is extremely important.
However, with spiraling costs of traditional 4 year college where the total cost of attendance (when you add up tuition, books, room and board) approaching approximately $25-30K for in-state tuition and significantly higher for other options, this can be very challenging for families to fund. What is a family to do? How should you approach it? Here are several ideas to think about:
- Understand your love for your children should not be questioned in your own mind. We as parents have a lot of conflicting emotions and thoughts when it comes to helping our kids. One of those emotions can be guilt. Understand your fiduciary responsibility to your kids is to love them, protect them, have a safe home environment, put clothes on their back and food in their belly. I think of my grandfather and many people at the beginning of the 20th century. He had to quit school in the 7th grade to help his family. We all want to help our children but virtually all of us have finite means and those means can be dramatically different. My mom could not really help me much as a single mother funding my post K-12 education but I never questioned if I was loved and had good base to figure out on my own, how to educate myself. For me, it was the military and going to night school. My sister and I understood she gave us what she could.
- Be careful on overextending yourself. When we are on airplanes, they give us the spiel at the beginning that in the event of an emergency put your oxygen mask first before your kids. The thinking is that if you don’t take care of yourself, you can’t be there to take care of your child. As I talk to people, the messaging I give is not looking at parents looking at their financial well being as being selfish. Most people would reject that message. I tell parents they should think of being self-sufficient. Being self-sufficient financially particularly in one’s later years is an amazing gift you can give your children. Kids that have to take care of their parents in later years financially can be incredibly challenging emotionally and financially. As Suze Orman would say, “You can’t get a scholarship for retirement.”
- Ideally, start saving when your children are young. Think of the value decisions in your purchasing and buying. For Donna and I, we stayed in our smaller house and avoided a much bigger mortgage payment because it allowed us to put more money into college savings.
- Have value discussions between parents/couples, as well as, kids. Formal education in and of itself is not the end goal for most of us. For most families, college is a stepping stone to get work skills that allow your child to be financially independent. That truly is the goal for most of us. Know that education is a value but like other decisions like home buying, auto, and others we have to balance value versus cost. Or, the debt burden one may have whether that is on Mom and Dad or the kids. We all would like to send our kids to any school we want at upward of $70-80K a year. Very few families can afford that with other goals especially if there are multiple children.
- If you do not have substantial assets in 529 or other places, I recommend that parents discuss what they can reasonably afford as annual budget and communicate that to your children. Is it $10K, 20K, 30K? Only you know what that is. This is vital especially if you have multiple kids. We have seen families put all their financial resources into their oldest child and then little or nothing is available for the younger ones. Need to factor this not just for one child but all of your kids.
- Parents need to educate themselves on college process. I highly recommend Ron Lieber’s “The Price You Pay for College”. That is Ron’s recommendation. Ron says that even though most colleges are considered non-profit, that is in tax ID only. Most colleges are very profit minded and they are big businesses who know how to market. 20 or 30 years ago parents generally were less involved in college process but with costs of $30K on up, parents really need to be involved. Most teenagers do not have financial wherewithal to mentally fathom the immensity of the decisions they are making. Mom and Dad should not be helicopter parents but they should be involved to help understand the financial ramifications as well as other important factors.
You love your kids!! Remember that. However, most of us don’t have endless pockets and have to make real world decisions. At HFG, we specialize in late stage college planning for our clients. We have software that helps our clients understand the cost of college for institutions and where one may be likely to get financial aid or not. If you would like to talk to us, please reach out to Melissa Anne at 410-838-2992 or firstname.lastname@example.org.