From working with many families, I have helped parents plan and prepare for the goal of assisting with their children’s college education. But much like a priest counseling someone toward marriage, I only had a technical knowledge, not life experience.
Now I’ve had a rendezvous with reality. Both of our daughters recently graduated from college. Those eight years were a harsh reality. You can count on this maxim: college will cost more than you think for your children or grandchildren.Much like becoming more aware of a car model right after you buy one, college students and their parents are acutely aware of the burden of spiraling college costs. Tuition at public and private education institutions has risen six to eight percent per year while the overall inflation rate has been around one to three percent in recent years. On top of that, the low interest rates on savings are squeezing families even more.
It’s beyond the scope of this article to probe why these costs are increasing so much. The point is to be prepared. I suggest focusing on what you can control rather than what you can’t control, such as the following:
- Determine what part of your child’s education you are going to be responsible for. It may benefit them to pay some – and it may just be a practical reality of your family’s financial situation that you cannot pay all of the costs.
- Communicate to your teenagers what your part will be and what theirs will be. It helps them save and have realistic expectations.
- Invest your savings in tax-advantaged accounts, such as a 529 plan.
A bank savings account over many years will not keep up with tuition increases. - Work with your child to explore alternatives. A “gap year” to earn additional savings and to be more certain of a college major? A community college for the first year? Online courses? Is a trade or the military more suitable than four to six more years of
classroom ?