When your kids are still in diapers, it’s hard to imagine they’ll ever be old enough to pack up their bags and head off to college. But it’s also important to start saving for college when your children are young. Ideally, you will invest this money, whether in a traditional investment brokerage account529, or even a Roth IRA, to build a larger sum over time.
And these days, with the long run CD prices being quite high, it’s not a bad idea to keep some of your college money in the bank, especially if your kids are already in high school and college isn’t that far away. This way, you won’t have a problem with this portion of your college savings if the stock market takes a turn for the worse in the coming years.
But while it’s important to do what you can to save for your children’s college education, it’s also important to set expectations and discuss what that money means. Here are some key points to cover during these conversations.
1. Examine the differences between in-state and out-of-state tuition
The type of school your children choose will make a huge difference in the cost of college. US News and World Report says that for the 2023-2024 academic year, the average cost of tuition and fees at an in-state public college is $10,662. For an out-of-state public school, it’s $23,630.
And then of course there are private colleges, which are a whole different world. The average cost is $42,162 for the current academic year.
It’s a good idea to review these costs with your children, so they aren’t disappointed. Your kids may start to fall in love with small liberal arts schools located in quaint towns and costing $60,000 a year. If universities like that are out of reach, it’s best to say that up front.
2. Discuss working while in college
Working while studying at university is a great way to bank in cash and offset part of the costs involved. And it could make an otherwise overpriced school accessible if there’s a compelling reason to go.
But working at university is not easy. In this scenario, there is pressure to apply for a job in addition to taking classes, pursuing internships, and getting involved in extracurricular activities.
Your children may be willing to work while studying – before realizing how that could lead to a world of added stress and less time to socialize. So make sure you look at both sides of the coin.
3. Consider the costs your children will face outside of tuition
Paying for college doesn’t just mean covering tuition, fees, and books. There are additional expenses to consider, the most obvious being housing, meals, and transportation.
But there’s also a less obvious expense to consider: entertainment. If your children are eager to go to college and enjoy a new environment, they will need to factor the cost of visiting local restaurants and day trips into their budget.
One thing you may want to point out is that the more you spend on tuition, the less money your children will have left for fun activities. It is therefore a balance that they will have to find.
It is absolutely important to save as much as possible for your children’s education. But you also need to make sure you’re having open conversations about college before your kids become high school seniors. This way, they will have a better idea of what to expect and they may have an easier time deciding which schools to apply to once that time comes.
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