We all know that higher education is an imperative step for our child’s future success. But, as parents, many of us accept that we don’t have any plans to pay for our child’s college experience. Experts agree that parents should plan for college expenses well in advance so we can meet those needs when they arrive. And as a therapist and college counselor, I’ve seen first hand how a little planning can go along way to help reduce stress in the future.
Why is college finance planning important?
College financial planning is actually a fancy name for management of cash (and assets) in a way that parents are easily able to meet the high education costs for their children. With a little college finance planning, you can ensure that your child can attend college and graduate without a ton of debt.
Moreover, college financial planning can also help you access different financial aid resources like government loans, scholarships, and financial grants. Proper planning is the key to reaping the maximum benefits from your hard earned money spent on your child’s education. In today’s world, the cost of college has increased beyond the reach of many parents. But there are some tips that go a long way in helping you cross the finish line!
529 College Saving Plan
When it comes to college saving plans, there are a ton of options available in the market. But the most common is the 529 college plan. This is a plan that allows you to save money for college education, while growing those savings in a tax-free account so long as the money is spent on qualified education expenses.
The maximum amount that you can invest in the plan is a hundred thousand dollars depending upon the state where you live in. If you do not use the saved money for your child’s education, you can withdraw the money, but you’ll likely need to pay taxes and potentially a penalty.
You can invest in a 529 college plan through either a broker or any reliable mutual fund firm. However, there are some disadvantages attached with the 529 plan. Most of all, 529 accounts typically have a limited number of investment options – although those limited options also makes it easier to manage the account over the long term.
Another choice is opting for an UGMA account. This is an option where you can contribute money as per your wish as long as your annual contribution does not go beyond $11, 000. As parents, you remain the custodian of the account. However, the account is set in your child’s name and there is a facility to withdraw the money whenever you want. The major disadvantage of the UGMA account is that there are very few tax benefits attached with it.
In addition, there are various other college investment plans which you can check and select.
Here are some reliable ways in which you as parents can plan for your child’s higher education.
Initiate a 529 College Savings Account
A 529 financial plan can be your launch pad for saving and investing for your kid’s college education. As per wealth advisors, it is imperative to start with small saving for a bigger future spending.
Create Your College Budget
Experts say that creating your college budget even when your child is young can make you safe from borrowing money. Planners usually tend to spend more on colleges and borrow less. Moreover, when you plan early, your stress levels are decreased and you can wisely put money into colleges.
Try To Invest in Your Child’s Talents
One category of investments that parents overlook is the early investments made in your child’s natural talents. All those extracurricular activities that your child participates in – like music, dance and sports – will give you an opportunity to win scholarships and aid. And with so many competitive colleges looking for well-rounded students, these skills can even help your child get into a preferred school.
Do Your Research – Or Hire a Great College Advisor
The net cost of college varies dramatically by school and by student. So, it is always a great idea to do your research. Public universities, private colleges and community colleges all have significantly different price tags. But there are so many other variables that can impact your actual costs.
Try To Save Some Money Every Month
Many families do not believe in having a college savings. However, consider how you can impact your child’s education and future with a small contribution each month.
Encourage Your Child To Contribute Financially
Many children believe that college tuition is solely their parent’s responsibility. However, this may not be the case. It is always better to talk to your kids about contributing substantially into a college savings account. This would make them more responsible and learn about financial organization as well. Talk to your kids and tell them about working opportunities and student loan options.
Talk To a College Advisor
If you are confused about how to go for college financial planning, then it’s a good idea to talk to a college counselor. The advisor can give you information about different investment options and ways to plan in advance. Their advice would definitely bring you in a better position when it is time to pay for college. Moreover, their professional advice would also give you detailed information about any kind of tax savings connected with these college investment funds.
Research Financial Aid Guidelines
Financial Aid opportunities vary dramatically by school. In fact, it is quite important to investigate financial aid opportunities before applying to colleges. Parents are often surprised that many private colleges provide greater aid opportunities than their public counterparts. In fact, private schools can often have a lower net cost after aid is provided.
The key to succeeding in this realm is understanding your options before you select and apply to schools. Your independent college admissions counselor should be able to help you expand your target list to include schools that have a high probability of offering financial aid to your child. And don’t forget that once you’ve been offered aid, be sure to carefully follow all guidelines so you don’t jeopardize the aid, grants and scholarships you’ve received.
Get To Know About Merit Aid Requirements
Try to get enough information about the different merit aid requisites which need to be completed for getting the college grants. There are many merit scholarships which require the students to meet certain specific academic standards in order to continue receiving college funding. Try to be sure that you understand these requirements. Some of the common requirements are maintaining a minimum GPA score, remaining enrolled in a particular education program, etc.
Be Open To Transferring Schools
It is ok to access your financial abilities to pay for a certain college. If the financial burden is increasing, try to transfer your child to a less expensive school. After all, it is always better to pay for what you can safely afford and not go into massive debt.
Make Liberal Use of Online Tools
To access whether a certain school or college is affordable or not you can use online tools to make net price calculations on the school websites. These online net price calculators can give you an idea about the true cost you would have to incur and whether their institution offers financial assistance. You will not know the exact amount of money the school could offer your child until they receive an acceptance letter and financial offerings.
Do Not Be Shy To Ask For Financial Help
If you are not able to meet the financial costs, consider asking the school for any extra assistance they may be able to offer. They may just be able to help you meet your needs!