By Joanne BarnardPaying education costs can be stressful for parents and graduates; estimates are staggering. Yet post secondary education is becoming a necessity to ensure a productive life. Planning
for post-secondary education now will alleviate borrowing later.
Newborn to seven years old:
Monthly set aside money for college. Even $100 for 18 years at 8% will give you nearly $50, 000. Whatever the amount, set up an automatic transfer to savings to occur when your paycheck is deposited, because money for savings is rarely there at the end of the month.
Seven to thirteen years old:
Continue the monthly amounts set aside for college. Around this time, open up a regular savings account in your child’s name at a local bank and have your child make regular deposits.
Deposits will consist of fifty percent of all income earned by the child. Let them know that this is for education and no withdrawals are allowed until then. If your child is shocked by the fifty percent, this is an excellent opportunity to introduce them to FICA, state, and federal income taxes. You can bring up that you set money aside for college and retirement.
Also mention that you have very little disposable income because all of their (the child’s) needs are provided by you, the parent. This will not always be the case and they need to get into the habit of parting with their income for various necessities.
Thirteen to seventeen years old:
If you haven’t done so already, take the accumulated money from the monthly college savings, and place it in a tax advantaged account like a 529 or Education Savings Account (ESA). Now is a good time to make this conversion; you have a pretty good idea that the money you have been saving will be spent on education, and you will have avoided the tax ramifications if at some point you needed this money for an emergency.
In addition to the money set aside by the child in their savings account, they can offset education costs by having a job, service, leadership, and a rigorous course of study in high school. These are recurring themes on college applications and lead to scholarships. Encourage them to take advanced placement (AP) classes. Depending on their score on the AP exam, the student can earn college credit, which will save money. Juniors and seniors can participate in Post Secondary Enrollment Option (PSEO). Through this program students may take college courses. Tuition costs are reimbursed by the school district for grades of C or better.
Senior year of high school:
Sit down with your senior and discuss what money is available and include the high school counselor for tips on bridging the gap between your savings and college funding. If they are headed to a four year college, and funds are limited, have them attend a community college for the first two years while living at home and working. They can get their general education classes covered, and then transfer to a four year school. The details of this plan are described in Zac Bissonnette’s book “Debt-Free U: How I Paid for an Outstanding College Education without Loans, Scholarships, or Mooching off My Parents.” This book is a must read for any parent with children, especially if you are toying with the idea of jeopardizing your financial security to fund your child’s post secondary education.