Children are cute, but they are expensive! From Montessori to MBAs, the costs add up. Whether you are thinking about starting a family now or about to send a child off to college, there are costs associated with all levels of education, and we’d like to share some ways you can start planning for these expenses, no matter what stage you are in.
Welcome Home Baby!
It’s hard to think about saving for your child’s education when they are still learning to crawl, but families can benefit from creating a savings plan far in advance! Different types of savings accounts offer unique benefits; for example, money market accounts earn higher interest and allow flexibility for withdrawal in the event you need to access funds more quickly. Many families start a 529 plan, a tax-advantaged investment account designed for saving money for qualified educational expenses. 529 plans, not only can be used for higher education, but can be applied to private K-12 education as well. If you’ve reached your stuffed animal limit, you can always suggest relatives contribute to your child’s 529 plan for holidays and birthdays!
The K-8 Years
The public school near you may be the best option for your child and your family. Public schools are funded by federal, state and local revenue and are usually the choice families make for the child’s K-8 education, but Charter Schools are tuition-free public schools that are privately run and have been becoming very popular in some areas. Parochial and private schools have tuition, but depending on your income and the school, you may eligible for financial aid. Whatever you choose, remember that school supplies, field trips, extra-curricular activities and club sports add up! Financing the fun parts of your child’s K-8 education may test your everyday budgeting skills.
Depending on your child’s interests, academic success or talents, you might have several paths to consider for your child’s high school career. Private or Boarding Schools often recruit scholars and athletes, but unless your child receives a full scholarship, these schools can be expensive. Financial aid is often offered but if that aid comes in the form of loans, be mindful that loans need to be paid back and that college is right around the corner. Vocational and Technical schools are increasing in popularity and becoming more competitive. These public schools prepare students for careers in the trades and can help graduates enter the workforce right after graduation, or set up the child for college with more hands-on learning in a particular field.
Whatever school you choose, chances are your child is not getting financially educated at school (a personal finance class is only a graduation requirement in eight states) so be sure to open up the conversation at home. Before you know it, your child will be making important financial decisions and you want to make sure they are prepared.
The College Years
Arguably the most expensive part of educating your child are the college years. According to US News and World Report, the average tuition and fees at private universities have jumped 144% and in-state tuition and fees at public universities have grown 211% over the last 20 years. The strategies you and your parents might have used to pay for YOUR college education may not work today. Talking to your child about college costs and who is responsible for what is a conversation that is often neglected. How you are going to pay and who is going to pay for your child’s college is an important conversation that should involve your child.
If you know you will need help funding your child’s higher education, your student can seek financial assistance using strategies like loans, grants, scholarships, work-study, etc. Some of these options (e.g., scholarships and grants) are essentially free money and do not need to be repaid. On the other hand, federal and private loans need to be repaid with interest. Students need to fill out the Free Application for Federal Student Aid, known as the FAFSA, to apply for federal loans.
PRO TIP: Sometimes, families feel like they have to choose between paying for their child’s higher education or saving for their retirement. Keep in mind that there are loan options for schooling, but not for retirement, so it makes good financial sense to keep your savings for retirement when possible. Consulting with a financial advisor, like those in our Investment Management Group, is a great way to determine what option will work best for your family.
There are quite a few factors to consider when determining the best financial strategy that balances funding for your child’s education and ensuring you can reach your other financial goals. Rockland Trust’s team of financial advisors and resources on our Learning Center are here to support your family through this education journey!
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