Ways to Fund a College Education – Using student loans, scholarships or college investments (529 Plan)

Summer is quickly coming to an end with school just around the corner. It is never too early to plan for college which includes the big question – how to pay?

Did you know that student loan debt is the second largest type of consumer debt (with mortgages being number one)? About one in nine people have a student loan with an approximate total of 1.3 trillion dollars. Knowing these statistics and working with parents and their kids as they prepare to pay for what can seem like a challenging and overwhelming feat drove me to want to write this blog in my series of Educating Kids About Money. In this final addition, I address the different ways to fund a college education, the idea of deciding which school or what kind of education, and whether school now or later.

Please see my other blogs on children and money here:

GOOD FINANCIAL HABITS: How and when to talk to kids about money

TEACHING CHILDREN ABOUT MONEY: Activities for preschoolers, middle childhood, and teenagers

As I’ve suggested in previous blogs and outlined on my website, there are 5 essential planning steps that can be applied as you help your child in this process. Keep in mind, as with all plans, the earlier you start the better; however, regardless of the timing you need to start! Having a plan can prevent any possible anxiety you and your child may experience just thinking of this subject.

Ways to Fund College Step 1: Assess the situation.

Ask your teenager to describe their goals after high-school. Do they want to go to college, join the military or peace corps, attend a technical school, go on a mission or maybe they are eligible for an internship?  This is a discussion that is best to have as soon as possible so proper planning can occur. Of course, keep in mind your child has every right to change their mind, but just starting the process gets you both thinking.

Ways to Fund College Step 2: Develop a plan.

Determine amount needed to meet their goal. Your financial advisor can assist with calculating as well as numerous tools available online. I like the resources available on Savingforcollege.com. Once you know the amount needed, you and your financial advisor can develop a plan. Again, it’s helpful to start this early so if any preparation required can occur – i.e. as a freshman your child can ensure they are taking the courses required to make them competitive for certain scholarships.

Ways to Fund College Step 3: Identify the tools you can use to meet their goal.

These tools include student loans, scholarships or college investments (529 Plan). This is the step that should be started as soon as possible. Meeting with your Financial Advisor can help before your child is out of pre-school. Check out a couple of these websites:

https://studentaid.ed.gov/sa/

Savingforcollege.com

http://www.militaryspot.com/news/pros-and-cons-about-going-military-after-high-school

Ways to Fund College Step 4: Implement the tools that best meet your needs.

Most likely it will be a combination of tools available. If you are properly prepared you may be able to keep your loans at a minimum. The most important aspect is to clearly understand how your tools work. Please reach out to your Financial Advisor and School Guidance Counselor for assistance.

Ways to Fund College Step 5: Finalize the plan and review it often to ensure you and your teenage are on track throughout the year.

Once you and your teenage have a plan, review it quarterly or at least semi-annually (end of each semester) to ensure you are on track. This will help with investments as well as if your child needs to meet any application deadlines for scholarships. It will also keep your child enrolled in the best courses.

If you’re unsure as to where to begin, or you would like to create a financial plan including education planning, consider requesting a consultation with me.

TEACHING CHILDREN ABOUT MONEY: Activities for preschoolers, middle childhood, and teenagers

*Please see my first blog in this series:

GOOD FINANCIAL HABITS: How and When to Talk to Kids About Money

I bet at this time you are well into the ‘heat’ of the summer. Perhaps your kids are telling you, “I’m bored” or “what can I do; there’s nothing to do”. The following blog in my series about kids and money will give you some fun activities by age group to teach your kids various money concepts. These activities will help establish a life-long skill – financial literacy – without feeling like they are at school.

It’s important to remember that children grow and develop at different rates. So, please use this as a general guide. Choose the activities you feel are best given your child’s personal development.

Teaching Preschoolers About Money: Ages 3 to 5

From the Consumer Financial Protection Bureau, it is known that this is the time when children are learning to stay focused, planning, following directions, completing tasks and solving problems. This is also good time to teach patience with regard to money and the idea that you don’t get something right away. These lessons may be simple but long-lasting and beneficial forming important habits and financial foundations.

Money Activities:

  1. Provide a good mix of coins. Practice with your child sorting the coins by type, separating in different stacks. Count how many coins in each stack.
  2. Introduce the different types of coins, practicing their name and value – a different coin each day of the week
  3. Teach patience – offer your child a snack now (i.e. one cookie) or explain that in 15 minutes she could get a snack and a drink (i.e. cookie and milk). Encourage her to wait and be patient so she can get the drink with a treat.
  4. Practice charity – have your child select a toy they would like to give to a child who does not have any toys
  5. Play restaurant using the coins they have been learning; create a menu and let your child order and then pay with the coins
  6. Invest in a “piggy bank”, a clear glass one is best so your child can see the amount increase; encourage your child to put any coins they get in their piggy bank

Teaching Middle Childhood Kids about Money: Ages 6 to 12

This is the time when children begin noticing their family behaviors around money. It is also the time that other children will start influencing your child through peer pressure; however, parents have the strongest impact when it comes to financial attitudes. Use this as a good time to create productive habits that will shape how they save, earn and shop.

Allowance vs no allowance. Some experts recommend starting an allowance based on doing small jobs or daily/weekly chores. Don’t give them money for doing nothing, they need to understand that money is something earned. And, then there are experts who don’t agree with paying your child for doing something. They believe that allowance is a tool to teach how to manage money. Check out the link below for more information on the concept of allowances.

https://www.learnvest.com/2011/10/an-answer-for-every-allowance-question

Money Activities:

  1. Use coins to add up to a certain dollar amount – learn there are different combinations available
  2. Put dollar values on plastic cups and have child put correct amount in the cup
  3. Use set of die to learn values of coins/dollars
  4. Assign a coin (or dollar) value to each item that makes up a snowman (i.e. 5 for hat, 2 for eyes) and have your child build a snowman and show you the cost
  5. Have a conversation about what you can buy with a certain dollar amount
  6. Plan a family meal and take your child on a virtual shopping trip – walmart.com, amazon.com
  7. Have your child research different items they would like to buy and make shopping lists – where to buy, what to buy – this teaches the importance of comparison shopping and need vs. wants
  8. Let them watch you pay the monthly bills. This is a good opportunity to teach them the cost of different household items. Its also a good time to talk about debit and credit cards. They’ve already noticed you using them, so might as well explain how they work and the differences.
  9. During this period, I also recommend taking your child to your bank and open a savings account for them. You’ll want to use the money they’ve been able to save at home. Help them continue to save with their allowance and ask them how much they’ve saved. This will encourage them to save and give them confidence as it grows.

Teaching Teenagers About Money: Ages 13 to 18

So much growth can happen during this time frame. This is when your teen will have a chance to make financial choices, realize consequences and then consider if they would make the same decision next time. It is the period in their life when financial habits and standards are strengthened. It is also the time that your teen is granted more freedom so that when it’s time to move out or leave for college, he or she is able to make their own financial decisions. Take this time to prepare your teen for the financial responsibilities they will soon experience.

Money Activities:

  1. Open a checking account – practice balancing a checkbook
  2. Create a budget
  3. Calculate expenses of buying/owning a car
  4. Plan the dream prom – what to wear, where to eat
  5. Pick a publicly traded company and track its stock performance for a specific period of time
  6. Practice with a certain monthly income and expenses – how does your teen spend the income
  7. Start a conversation about their future and research costs/income opportunities– What does it look like? Will they live in an apartment or house? What kind of car with they drive? Do they have pets? What salary will they make?
  8. Compare college prices
  9. Get a summer job

GET THE MONEY CONVERSATION STARTED

You don’t have to be an expert in finance with a perfect track record to teach your child financial basics. Take this time to get the conversation started and be a positive role model. It may even help you organize your own finances and get you back on the pathway to the financial future you want.

GOOD FINANCIAL HABITS: How and When to Talk to Kids About Money

By now summer vacation has started for most kids and you might be trying to make sure you have plenty of activities planned to keep them busy. Feel free to refer to my upcoming 3 blogs as not only a good summer activity, but also the establishment of a life-long skill: financial literacy and your children.

As a Financial Planner, I often notice that families may not have considered setting good money habits with their children, for one reason or another. However, it’s never too late to start!

Teaching Children Money Issues

As a parent I am sure you spend quality time teaching your child life skills that will help them as they grow into independent, responsible, and respectable adults. Maybe you taught them the importance of treating people how they’d like to be treated or perhaps you taught them to change a tire or even cook. But have you spent any time with them discussing the wide range of money issues, from everyday skills as balancing a checking account to long-term planning for retirement?

Based on the 2018 T. Rowe Price survey, 10th Annual Parents, Kids and Money Survey, 66% of parents have some reluctance to discuss money with their kids. This could be because it is difficult to know what age to start teaching and how best to do it. Every child learns at different rates, but the following is a basic timeline of what and when money topics can be addressed. Also, I will delve more into each age group in my next blog.

Good Financial Habits for Elementary School-Age

  • Ensure there is an understanding of needs and wants
  • Explain how money is earned/acquired
  • Show what household items cost
  • Make them responsible for buying something small (i.e. a favorite snack)
  • Set up an allowance/commission
  • Have them establish a small savings goals (i.e. a toy or flowers for mom/dad)
  • Open a savings account
  • Teach them about the different types of payment methods (i.e. cash, check, credit, debit)

Good Financial Habits for Middle School-Age

  • Make them responsible for some daily expenses (i.e. snacks)
  • Show them how to comparison shop
  • Teach them about advertising and making wise purchases
  • Teach them about savings accounts and earning interest
  • Have them watch you pay monthly bills and explain
  • Introduce investment basics (i.e. what is stock)

Good Financial Habits for High School-Age

  • Make them responsible for most daily expenses and entertainment (i.e. hobby, school clothes, portion of cell phone bill, bus money, some car expenses)
  • Assist them in finding a part-time or summer job (i.e. resume, job search)
  • Teach them about paychecks (i.e. taxes, W-4 form)
  • Open a checking account with a debit card
  • Teach them banking basics (i.e. balancing an account, ATMs, online banking)
  • Introduce credit basics (i.e. credit cards, loans, credit scores)
  • Discuss college costs (i.e. community college vs 4-year university, student loans, scholarships)
  • Interact with stock market – create a list of stocks and track their progress

Take time to teach your children

Money can be an exciting topic and kids want to learn how to earn, spend and save. Keep in mind that positive financial skills are the result of responsible habits. The more you make time to teach your kids and take advantage of teachable moments the easier it will be for your child to become a financially responsible adult.

Stay tuned for the next blogs in the series.

I have a passion for helping families set good, positive examples of how to spend money, how to earn money, and how to save money. All in a responsible manner.