Saving for Your Child’s Education: Making the Right Decision

[This is the article two of three in my saving for college series. See the others here:

• Why You Should Save for Your Child’s Education…and Why You Shouldn’t
• 4 Ways to Save for Your Child’s College Education

Now that we’ve gone through the pros and cons of saving for your child’s education, I want to discuss how you should decide which direction to go. For the most part, I’m sure you already have your mind made up about it–even if you don’t even had kids. I know I did. But this decision shouldn’t be made flippantly or without serious consideration. Here are the two things that made me reconsider:

1. The more I learned about the issue of tuition costs and student debt, the more I realized the problem is only going to get exponentially worse.
2. Looking into my son’s eyes for the first time, I decided he deserves for me to at least thoroughly explore both options to make sure we’re doing whatever we can to help him reach his potential.

Don’t assume anything

So you think your kid is going to get scholarships? Or that he is going to work through school just like you did? The fact is, you and I don’t know much about the future. It would be really easy to plan things like this if we did. But making assumptions like this can do a lot of harm if things don’t pan out. What if the workload for your child’s major precludes a full-time job? What if your child gets scholarships but they cover the full tuition? What if she gets nothing at all? A friend of mine was accepted to a competitive private university with a 3.9 GPA and a 32 on her ACT and didn’t qualify for an academic scholarship. The point is, the best way to make this decision is to assume there is no fall back.

Talk to your spouse

It’s really hard to find a couple that agrees completely on how they should approach this. But like with the rest of your financial life together, you should always be on the same page. Go into the conversation with an open mind rather than a plan to convince the other. Keep your emotions in check. This doesn’t have to be a reason for contention. Don’t be afraid to explain your feelings on the matter, but be careful not to patronize your spouse or tell them they’re wrong. There is no one-size-fits-all answer, but the sooner you come to a consensus, the easier it will be.

Is your family protected?

As much as you might want to take care of your kids 20 years from now, it’s far more important to protect them now. A college savings account isn’t going to fund itself if you happen to die or become disabled. Make sure you have life and disability insurance on both parents, if you’re able to. In fact, it’s not a bad idea to include future college expenses when determining how much life insurance you should have.

Once you have that taken care of, start working on an emergency fund. Saving for college expenses does your kids no good if you’re constantly siphoning funds to cover car repairs or home maintenance issues.

Set your expectations

Time for a hypothetical question: If you do end up deciding to save for your child’s college costs, how much are we talking? You might decide to save for the cost of in-state tuition at the local college. My in-laws told their kids they could go wherever they want, but they’ll only cover as much as the tuition at Brigham Young University, which is owned by our church.

Your kids may end up choosing to go somewhere else, like the Wealth Within Institute for instance. But if you decide to help out, it should be on your terms, not theirs. The last thing you want is to wing it and your daughter or son ends it’s in your plan, of course).

Review your other goals

What are your other short-, mid- and long-term goals? Write them all down and prioritize them. Which ones are the most important to you? Are some more urgent than others? Unless you have a solid income, you’re likely not going to be able to tackle all of your goals at once, so this should give you a good idea as to how feasible it is to add this to what you’re already working on.

How is your retirement plan doing? There’s no reason why you should save for their education but not your own retirement. Like I said in last week’s post, they have student loans as a last resort, but you don’t have the option to take out retirement loans.

Love your kids

Your ability/desire to save for your children’s education costs is not a measure of how much you love them. In the long run, what you do in your home as they grow up has an infinitely stronger influence on their future success than the amount of money you put up for their higher education. Also, loving your kids can decrease the chances they’ll sue you for tuition expenses like this girl did. 🙂

What helped you decide whether or not to save for your child’s education costs?

(photo cred)