As parents, we all have dreams for our children. For many parents, a vision of watching them graduate from high school one day and heading off into a bright future that includes a college education is at the top of that list.
But in a time where student loan debt is greater than all credit card debt combined and comes in second only to mortgage, the sticker shock that most families encounter when reviewing post-high school options is unlikely to change anytime soon.
So how can parents learn from today’s debt crisis while ensuring their loved one’s pathway to success is protected?
It starts with open and honest family conversations about money, especially about saving and paying for college, to drive home the message that you’re invested financially and philosophically in their educational future. Here are some quick tips on tailoring the conversation to your child’s age level:
Grades K-5: Put Your Money Where Your Mouth Is
Opening a college savings account in the early years of parenting can be a daunting task for families that are juggling multiple priorities. Don’t worry too much over “when” to start saving for college – there’s never a perfect time. Just get started when you can!
Once you have started, show them the money! Are you saving already in an Invest529 account or another 529 savings account? Great! Show your child your statements! Sharing with them creates a nice lesson on personal finance, the importance of saving, and how to work toward a goal. Plus, research shows that when children know they have college savings set aside for them, they are much more likely to plan to attend college – even if they are still in elementary school!
Grades 6-8: Offer a Lesson in Investing
There is no need to lock down firm career choices by middle school. If your child is still aspiring to become a professional athlete or YouTube star, there’s still plenty of time to talk to them about how most careers in today’s economy require some certification or education beyond high school.
Continue discussing the savings you are accruing in their 529 account, but now that they are a little older, add another layer into the conversation: share the tradeoffs. Did one of their friends travel by plane for a family vacation over the summer? Maybe share that your family opted to take a road trip instead to emphasize the priority you are placing on saving for their college bills. This may help your child understand what a big undertaking it is to pay for college, and that you are committed to helping offset those costs. This is also an opportunity for a personal finance lesson on investing, and how the money you set aside now can grow and compound over time.
Maybe you are still repaying your student loans or you had to make sacrifices when you were paying them back. This is an opportunity to share with your child how borrowing money for college has affected your family’s budget. You don’t have to go into extensive detail, but these conversations provide a foundation for them to think about going to college and paying for it — and can lead to more responsible decisions in the future.
Grades 9-12: College Bound
The high school years come at you fast. They quickly become a series of in-person and virtual college campus tours. It can be tempting to let your student dream freely of attending a college anywhere they want, but the stakes are high, and the budget conversations should be grounded in reality. Talk to your child about what they want from college, and what your family can afford BEFORE going on tours.
After all, their college education is an investment in their future, but it is one of the largest purchases your family will ever make. So, continue asking yourself these important questions:
- How much can I afford for my child’s college and how much am I willing to contribute to their college education?
- How much am I going to expect my child to contribute to the cost of their education every year?
- Will I expect I expect my child to take out student loans?
Once you have put some thought into those questions, be realistic and transparent with your high schooler about what is financially feasible for your family.
Sit down together with a college cost calculator to figure out how much student loan debt you or your high schooler may have to realistically take on to pay for college. Make sure to share with them how much will be available in their 529 account to cover qualified education expenses when they are ready to enroll.
Your student may qualify for scholarships but be careful not to overestimate the amount they could receive. You may not want to factor scholarships or grant money into your calculations to ensure your college cost plan isn’t dependent on them. At a minimum, plan to submit the Free Application for Federal Student Aid (FAFSA).
Talking about college costs, saving and potential debt early on sets expectations that you are working as a family to save.
It’s not clear how much college will cost in the future, but for families trying to prepare for a child’s education beyond high school, parents need to be flexible and resourceful.
Start saving now and often in a 529 account, make sure to take advantage of all resources your state has to offer its residents in making college affordable, and include your child as an active participant in the planning of their future in whatever age-appropriate ways you can!