Can you believe how quickly the summer ended? It seems like just last week, my family and I were watching 4th of July fireworks, and making homemade ice cream! Now, back to school activities are top priority in everyone’s mind.
In my hometown of Norman, OK, heading back to school reminds us that University of Oklahoma football (Boomer Sooner) is just around the corner. If your child isn’t a star quarterback, however, college can be insanely expensive. Trying to figure out how to fund a college education can keep you up at night. Here are a few ideas to help you rest.
First, scholarships and grants can help lower the burden of paying for college. Take time to research opportunities carefully. Remember, too, that good grades in high school may be worth more money than a minimum wage job. All teenagers want spending money, and we want them to learn responsibility. But working toward a long-term goal without immediate results requires great discipline, as well. Don’t focus so much on short-term earned cash that your child doesn’t have time to study or participate in school activities that could lead to a scholarship or grant.
Additionally, because many scholarships are based on college entrance exams, like the SAT or ACT, have your child take review classes and practice tests to help raise his or her score. Unfortunately, college entrance has become something of a contact sport, so scoring very well on these exams is more important than ever.
You can save money and help your teen bridge between high school and a large university by having him or her take freshman classes at community colleges. Just be careful that attending a community college doesn’t lower the chance your teen might be accepted at a prestigious university. If this is a concern, have your child enroll in high school and the community college concurrently, and that will usually solve the issue.
Another strategy for lowering expenses is by paying in-state tuition rather than out of state. If your teen is going away to college, research the options for establishing residency in the new state. Although it might take a couple of years, the savings could be significant. Remember that if you establish your child as independent, he or she likely can no longer provide you with a tax deduction. However, the changes in the new tax laws have already eliminated exemptions for dependents on your tax return.
Certainly, saving money prior to college is a great way to cover costs, but be careful. If you decide to invest in a college savings plan, like a 529, look first at your own state’s plan for both potential benefits and tax savings. Too often, financial advisers recommend out-of-state plans, claiming they are better. You should know it’s likely that the adviser is receiving a commission or other compensation as part of this advice. Although sometimes your state may not be the best choice for you, I believe most times, it is fine, and remember if you choose an out of state plan, you lose the state income tax deduction. Rather than paying an adviser, you can enroll your child in the plan, yourself. Just research the fund choices carefully to choose an appropriate risk tolerance level, keeping in mind how long it will be before your child needs to access the funds.
Finally, start saving for college early, but not at the expense of retirement. Your own financial stability should be established first. I’m always concerned when parents prioritize paying for college higher than paying for their own retirement, as it could cause their financial future to be underfunded. No one wants to imagine depending on their children for support when they are elderly, but unfortunately, it happens. Don’t be distressed if you can’t help your children pay for college. Instead, support them, encourage them, and assist them in other ways. Really, it’s what matters the most.
The Fine Print: This article is educational, not investment advice. Investing is risky, and you can lose money. Talk to your financial team about any strategies before you implement them.