Teeth in the Game: Getting your kids to take a bite out of your burden to save for college
I’ll bet when your brand new bundle of joy kicked off the receiving blanket, you began to tabulate the cost of a college education. And if you haven’t thought about it yet, it’s never too late to start building a college savings fund – no time like the present!
The cost of a college education has soared. Sadly, I’m seeing an alarming trend – parents raiding their retirement funds to pay for their kids’ college education. I can understand why – tuition has skyrocketed by 130% over the last 2 decades, as income for many families has declined. I don’t want to be the bearer of bad news, but take a look at the numbers:
If you’re tempted to pillage your own retirement accounts – consider this. You could jeopardize your own financial future to do so. I’m betting you don’t want to become a burden on your children later, so take care of yourselves first.
For now, start laying the groundwork for your children to get some teeth in the game. (Even if their teeth haven’t quite come in just yet!)
Many children grow up listening to their parents extol the virtues of a college education. But use caution in creating a family culture where children believe they’re entitled to a college education. In today’s climate, many students will have no choice but to contribute toward their education or finance it entirely – and with the right guidance, that could be a good thing. Here’s why:
Whenever we’re invested in something, we tend to place in it more value. I believe students with teeth in the game get better results. I encourage parents to prepare their children to invest in some share of the tuition, by working part-time for books and/or spending money, maintaining a certain GPA average in exchange for tuition, or taking out student loans. Doing so gifts your children with an increased capacity for work ethic and time management skills – plus, using their own funds prevents them from falling prey to the temptations of campus life.
Don’t forget to discuss what the potential payoff may be for their investment in a college education. Current statistics show an alarming gap between expectations and reality for college graduates. According to a 2011 Charles Schwab Survey, teens expect that on average their starting salary will be $73,000 out of college. Have a realistic conversation about your child’s career of choice and future ability to repay college loans. Allow this to guide you and your child in finding a healthy threshold for debt. Don’t worry. They’ll thank you later!
In my own state of Arizona, the issue of rising tuition costs has led to a legislative effort: propose House Bill 2675. The bill, authored by Rep. John Kavanagh, requires that every student pay a minimum of $2,000 toward tuition at public Arizona state schools – although, students who receive national scholarships based on academic merit or athletic ability are exempt.
What do you think? Should all students be required to pay something? Should this decision be left for the parents to decide…not the government? Either way, this issue will continue to make local and national headlines as funds dry up and universities struggle to balance budgets – just like everyone else.
Building your college savings fund: Which option is right? Get advice from the experts -
As college costs continue to skyrocket and the economy proves uncertain, planning for tuition, books and living expenses may be daunting. I strongly encourage you to enlist the help of a CPA or certified investment or financial advisor to navigate the varied options available to you in building a college savings plan – including systematic savings vehicles, such as savings bonds; education specific savings vehicles, such as 529 college savings plans; and of course, garnering funds from scholarships, grants and loans.
Whatever your choice, make certain to integrate your children into the discussion. Involve them in the decision-making process, and talk with them frequently about the status of your goal. By the time they’ll need to pay for college, your kids will have become accustomed to this idea: they are, too, responsible for the careful stewardship of funds they’ve built, earned, or borrowed.
Getting Kids to Contribute: Think outside the box
Creativity and diligence count when planning for college. Check out these ideas and share yours with us.
1. Incentivize your kids to save their earnings from jobs, or a percentage of money from gifts by creating a matching funds system.
2. Invest in real estate as a means by which to pay for college or provide housing for your kids, where they act as property managers and collect money for rent from roommates.
3. Inspire your kids’ entrepreneurial spirit – encourage them to launch a side business such as landscaping, child care, computer maintenance, arts camps for young kids or home and pet care, promoting to customers they’re using their earnings toward college.
Got an idea to share? We want to hear it. Please chime in and let’s get the conversation going!
Today’s Savvy Money Management Tip: Ask your children to clip coupons to use at the grocery store. Tally your savings, and add it to their college savings account. Teach them that over time, modest amounts add up. Remember – little wins!