A dad’s head hurts; how can a dad and
his wife afford to send their kids to college in today’s environment of rising
tuition costs and dwindling financial aid? Families face numerous common
pitfalls trying to pay for their children’s college educations (without going
into debt). Success stories are all too uncommon. Like Denning (2011) shared in
his book, The leader’s guide to
storytelling, a memorable knowledge-sharing story is typically unusual (out
of the ordinary). Denning (2011) further iterated most learning experiences
rise from bad news. However, positive news stories also play a part in a
successful story. In general, families being able to pay for college starts
long before students begin attending high school.
For an overwhelming majority of couples,
welcoming their children into their families involves truly breathtaking and
humbling and proud moments. Parents are often excited for all the excitement of
parenthood. Economics are only a few of the concerns that “haunt” parents.
However even before their children are
born, financially astute parents agree to build nest eggs to fund their kids’
college educations so they won’t have to borrow from the future. Parents must
help their children avoid the tragic and all too common overwhelming burdens of
sizable student debt.
A vast majority of parents realize
college arrives at their doorstep sooner than later…even when that would be
15-18 years in the future. Most have heard the horror stories of college price
tags in the tens of thousands for each of their “critters”… without a plan in
sight to create and grow college funds.
Fortunately, parents can rest in the
assurance of ageless axioms: “A journey of a thousand miles begins with one
step.” And “How do you eat an elephant? One bite at a time.” Parents must
research financial resources and discuss concerns with friends, then assemble their
plan for their children. Parents’ focus must be for their children to graduate
from college incurring student debt.
How can a family achieve that goal in an
age where overwhelming college debt crushes the spirits of so many graduates
who’ve incurred debt in the tens of thousands? First, immediately start your
college saving strategy. As soon as parents receive social security numbers,
open savings accounts for them and deposit baby gift monies into their
accounts.
Second, leverage state 529 plans:
·
529s are tax free tools. Your
kids’ nest eggs grow without losing money to Uncle Sam.
·
Kids are the beneficiaries in a
parent’s 529 plan. As a result, the dollar values of those accounts are not
“counted against” them when schools/federal government calculates financial aid
packages. In contrast, UGMA accounts belong to the student, count as student
income and thus lower financial aid potential from other sources.
·
Contributions to 529 accounts are
tax deductible with respect to a parent’s state of residence. You may lower
today’s state tax burden AND keep contributions to the college funds and their
respective capital growth safe from taxes.
·
529s authorize a beneficiary to
withdraw contributions for education purposes: tuition, room & board,
student fees, etc.
Third, monitor your college investment accounts
and look for different tools/programs to improve returns.
Fourth, diversify college fund portfolios.
Deposit financial gifts from family members directly into their 529s. Also,
retain gift certificates of deposit and U.S. savings bonds until maturity and
then deposit those monies into 529s and mutual fund accounts.
Lastly for military members, they enjoy
a tremendous education funding “perk.” Military members and retired can access up
to 36 months’ worth of tuition payments via the Veterans’ Affairs post 9/11 GI
Bill. Transfer GI Bill benefits to your students to pay for college. As a
result, they’ll enjoy a nearly full-ride scholarship.
Parenthood is a tremendous privilege and
responsibility. However, one of the greatest taks parents face is preparing
financially for their children’s college educations to avoid student debt. The
effort and commitment requires parents to step out boldly to educate themselves,
build a plan, and then execute, monitor, and adjust that plan. Leverage several
tools to grow your children’s education “nest eggs”…the greatest tool being the
post 9/11 GI Bill. As long as the stock market meets expectations and college
costs don’t soar, your children have a “good shot” at earning their
undergraduate degrees and still have money left over to build their futures.
Reference
Denning, S. (2011). The leader’s guide to storytelling. San Francisco, CA: Jossey-Bass.
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