Avoid Financial Blunders as You Get Closer to Sending Your Child to College
Every parent feels nothing but guilt as they get closer to sending their children to college and it's that guilt that causes people to make a financial blunders. I am sure you have heard the old saying, you can always borrow money to go to college but you can never borrow money to retire.
Here are a few of the big mistakes that I have seen:
· Not having a family mission statement on how much money each member of the family needs to pay for college is a big mistake.Everyone should know how much the parents are willing to pay and how much the children are expected to pay.
· Stopping saving for retirement while your children are in school. Not funding the 401(k) plan because your children are going to college will hurt you because you lose out on the time value of money and you'll probably miss out on employer match as well.
· Taking out student loans without having a frank discussion of how much you can afford to repay. I have seen many clients who took out large student loans and then had a financial downturn and could not make payments on them. It is amazing to see how quickly the principal balloons when you are in forbearance on a student loan.
Student loans are shared concern for both parents and students and shouldn't be entered into lightly. I often show people what the cost will be per monthand overtime for student loan so they can see the true impact it will have. If the cost is too high, they should think of commuting for at least part of their time while in school.
All students should work summers and the family needs to decide what percentage of the money goes to college funding. My favorite plan is to put all of those earnings into an online savings account and to use the money in the last year of their schooling. It is a source of pride and gives them bragging rights to later say, “I saved $____ for my own education”.
If you have additional questions, please feel free to call my cell phone at 201-650-0753. Also, check out our website at:
Timothy Watters, CFP