College Planning from Birth to Graduation

It’s never too early or too late to start saving for a child’s education. Here are some notes for parents to discuss with your Financial Professional on what you can do at each stage of development to help maximize the savings and earning opportunities. Following this advice can make the sometimes overwhelming prospect of saving for college not only manageable but enjoyable.

• Start automatic investing right away. Even a little bit makes a huge difference thanks to the power of compounding.
• Ask your parents for help. Grandparents are not only newly and justifiably proud, they understand all too well how difficult it is for parents to manage a child’s financial burden alone.
• Use the celebration of your child’s birth to encourage friends and family to give. Large or affluent families might do more for the child by setting aside a little for college. A gift early on has a much better opportunity to grow than one made later.

• Shift savings from day-care/pre-school fees into 529 contributions. If your child enrolls in public school, you will probably save a lot from what you were formerly spending. Why not put some of those savings into the college savings plan? If you already contribute automatically, consider increasing the amount. If you don’t automatically contribute, now might be a good time to start, before you figure out how to spend the extra money.
• Leverage expanded income if you become a two-income household. If you wait until kindergarten before both spouses work, consider putting a portion of one spouse’s income into the 529. Planning ahead in this way can really make a long-term difference.

• Keep your child in the loop on college savings. Discuss the value of education, the costs of college, the support of family (and parents), and finally, the importance of the child saving too. Allowances or a first job are a great place to start.
• Talk to your parents about making sure you are on track. Now’s the time, with over five years to go, to have an honest discussion about whether you will have enough saved for college. Accelerated gifting allows up to five years’ worth of contributions at one time. That’s $170,000 per beneficiary free of gift tax for couples, $85,000 for individuals. 

• Start researching financial aid by the child’s junior year. A thorough knowledge of FAFSA (required Federal Financial Aid form) can identify opportunities to reduce the parents’ share of college costs that you can discuss with your tax and/or financial planner. In addition, there are scholarship and gift opportunities that go unclaimed or underutilized because families don’t look close enough for them.
• Encourage your child to put aside income from a part-time job. Negotiating over expenses in the expensive teenage years can be a challenge, but one thing that should not fall by the wayside is the child’s education. The child making a financial commitment of any kind makes the college experience more meaningful.
• Maximize opportunities for gifts from friends and families. Achievements, birthdays, graduations are all opportunities to involve loved ones in the common goal.