Michael J. Evans, The Cogent Advisor, Chicago
As a concerned parent, I’ve been giving college planning a great deal of thought. As a professional wealth manager, I’ve been familiarizing myself with economic realities; listening to the questions and concerns of my clients, friends and colleagues; and objectively assessing what practical solutions may exist.
My conclusion: I believe that many families are seriously overdue for some candid, in-depth conversations about the costs and benefits of higher education. From the standpoints of prudent household fiscal management as well as personal family well-being, we’ve got some sacred cows that need to be examined — and in some cases, put to pasture.
Following are five key considerations to help you begin or continue the conversation: for you, for your child, for your family.
For richer or for poorer, avoid the “blank check” approach
This one strikes me as the biggest issue for parents who are planning for their children’s education — telling children that a blank check awaits them for any education their hearts desire … even if the funds are readily available to make that promise.
It can be ill-advised to tell your children that money is no object in their decision-making, whether it’s for higher education or anything else. Even if the money is there, you are missing a great opportunity to discuss wants versus needs with your child — in this case, what an education is worth and what you are willing to pay for it.
By telling your children up front that you’ve set aside “X” dollars for their entire education, you and they can consider how best to allocate it between their undergraduate and graduate degrees.
Start planning–in detail–sooner than later
Begin your conversations with your children early based on their individual interests as well as your realistic abilities to financially assist them. Speak with them about choices you should make together, such as which schools they’d like to attend, where they can realistically afford to go, and how much each of you can and should expect to contribute. Avoid platitudes and vague generalities; concrete planning and hard numbers offer your best opportunity for solid results.
Make the education planning educational
Use college planning to teach your children how to consider and establish sound financial habits early on. By engaging them in a family/team approach to the challenge, you’ll not only help them assess their near-term goals, you’ll provide them with lifelong critical-thinking skills.
The choices for which university your child attends should be based on more than just the enviable location, sweet dorms, top-notch food courts or the ability to hang out with their friends. Those aren’t needs; they’re wants. You owe it to your child and yourself to help them understand the difference well before the first day of classes begin.
It’s also a great time to discuss with your children how they will contribute to their educational costs, such as through applying for loans, work-study programs, grants and scholarships, and/or selecting a good school offering more financial aid over a better one offering less.
Higher education is an investment
For your children’s and your own well-being, remember that a college degree is an investment. It is not sacrilege to speak to your child about the return on investment of their degree, measured by the salary he or she can expect to earn with the degree.
In assessing undergraduate goals, it helps to include a discussion of what today’s employers are actually requiring in their desired field. Is a graduate degree going to be essential? How long will it likely take to unload the debt incurred?
Don’t sacrifice your own well-being for college funding
Providing for your children’s true best interests may not be as obvious as a sky’s-the-limit approach to college funding. If helping your child pursue his or her life’s goals impoverishes you, puts your ability to meet future expenses at significant risk or short-changes the younger siblings, the tale is unlikely to end well.
The View From Here
Parents often have a skewed, if well-intended, view of their responsibilities regarding their children’s college funding. I frequently hear my clients and peers tell me they must send their children to the best schools they can get into, which usually translates into the highest tuition. They justify the decision by proclaiming that no expense is too great for their children’s future.
By taking a different approach and objectively considering the costs and benefits of higher education as an investment as well as a learning opportunity, you guide your child in making a successful transition from dependent youngster to self-sufficient adult emotionally, intellectually and financially. When viewed from this perspective, your son’s or daughter’s dreams stand a better chance of elevating from flights of fancy into real-life adventures.
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