Women at Work: Tips for parents of kids starting college | Business
Our daughter, Haley, is starting her junior year of college in a short couple of days. Although this year will not be quite as difficult as saying goodbye to her when she was a freshman, I will still swallow a lump and fight tears as I did her sophomore year. This week has been filled with packing clothes, buying supplies, and making sure the correct textbooks have all been purchased.
During the past two summers, I have held many conversations with parents who are embarking on the journey with their child to visit and choose just the right college. We only took trips to visit Kansas University, Mankato State, and Viterbo University. Each college had different price tags as two were out of state, one a public university and the other a private university.
In the end, Haley chose Viterbo University (I let out a sigh of relief when she chose as she would still be close enough to visit whenever she wanted). At first the price tag scared us, but with her applying and receiving scholarships (which all students should do), we settled down and were able to put a plan together for her to graduate with minimal student loans to pay back.
I know there are many parents walking this same path, so I want to share a few tips garnered from Northwestern Mutual’s recommendations:
1. Do the math. To set and achieve realistic college savings goals, start by understanding what college may cost. Don’t let the cost put you off, however. The actual, final price (or “net price”) you’ll pay for a specific college is the published price to attend that college minus any grants, scholarships and education tax benefits for which you and/or your child may be eligible.
2. Open a college savings account. You have more options than ever when it comes to saving for college, ranging from tax-advantaged government savings plans (for example, 529 plans) to investments and permanent life insurance.
3. Start right away. Look at your budget and come up with a realistic amount you can contribute each month. Even a small amount of money, if invested early, can become sizable through the power of tax-deferred compounding. For example, if you save $250 a month in a tax-deferred college savings plan and earn a 6 percent annual rate of return for your newborn child, you’ll have more than $148,000 for college when he or she turns 18.
What if you put off saving and your child is now in high school? You still have an opportunity to save. Remember, college costs don’t arrive all at once; they stretch over a period of four years (or more).
4. Get your kids involved. Start discussing college with your children in middle school or even earlier. Focus on the qualities they should identify in a good college for them, and help them see which options may be viable if they get good grades and receive merit-based aid. Encourage your kids to set aside part of their weekly allowance, summer earnings, and/or any cash gifts they receive for their own education. Every dollar they save is a powerful reminder that college is an important part of their future.
5. Don’t derail retirement. Many parents and grandparents view funding college as one of their most important financial priorities. However, don’t let your desire to fund your children’s education stall you from saving for retirement. Your child can always attend college by taking out loans (or maybe even with scholarships), but there’s no such thing as a retirement loan.
Three years after I first read these tips, they definitely still apply. But, what have I also learned? Never stop applying for scholarships! They should not be ignored beyond the freshmen year — there are plenty out there.
Kristen Asleson is owner of Midwest Virtual Assistants. Send comments and ideas to firstname.lastname@example.org.