For many people today, having a college education is a base requirement for obtaining a higher paying career. However, college costs continue to increase many times the average inflation rate. Therefore, it is imperative to engage in College Education Financial Planning.
1. Get a written financial plan. Call a financial planner or obtain a written plan (e.g., with eFinPLAN) to organize all of your financial affairs and to plan for the future. Many people hope to pay for college; however, without a plan it is just a wish. The best way to plan for college is in the context of a financial plan that will help guide you simultaneously through all the moving parts of your finances. That way you will make more informed decisions about insurance, college and retirement–about all of the areas of your plan. A plan helps you avoid neglecting one area because you focused too much on another area. A financial plan will also help you spot trouble areas, such as too much debt, and will provide suggestions to improve your overall situation.
2. Establish priorities and set reasonable goals. A vital part of financial planning is establishing goals that are reasonable and setting priorities for your financial objectives. Doing so will provide clarity for your financial plan. Many people want to retire early and pay 100% of their children’s education, but it may be difficult for some people to do both. Some have as their highest priority paying for college, and they inadequately put aside funds for retirement. Probably he most reasonable goal is to provide funds for retirement first and secondly to put aside money for college education.
3. Explore the different sources of funding. College costs are increasing at an alarming rate (see below), making it difficult for many people to fully fund for college. That fact should not discourage you from planning for or from attending college. Check out the article 14 Sources of College Funding and Calculators.
4. Student financial education and management. Students should be engaged in the process of planning, funding, exploring and applying for funding sources. Making students part of the process helps them to know and be informed about all of the issues, and it may open more doors to financial opportunities. Secondly, teach your children financial management, budgeting, and debt avoidance skills, so that when they go off to college they don’t add to the amount of debt they might have to incur.
5. Set realistic goals that reflect your beliefs and make a decision you can live with: There are many options, but only you the parent(s) can decide what works best for you, your children and your family, and only you can make choices that reflect your values, beliefs and affordability. There is no one right way for everyone. Some people believe in paying for their children’s full room, board, tuition and books, and on the other extreme they feel the costs should be entirely paid by the student. Then there are those that fall in-between, either due to economic reasons or to philosophy. Consider your alternatives, talk to people who have been down this path before, evaluate the costs and effects on your overall plan, and look at your financial situation. Talk you your spouse, and consider the child as well, since each one of them is unique. Base your decision on this evaluation, and try not to bow to peer pressure. If you do, you’ll lose any control that you might have, and emotions and debt easily enter in.
