If you have kids, then the thought about how to pay for college has surely crossed your mind… I know it has for me. I have three kids myself and I can say from experience that the cost to educate your kids can add up.
And it’s not just about the tuition itself… there are ancillary expenses such as the need for transportation and weddings.
At this point in my life, I have one who graduated from college and is married with a baby, one who is in college and another who is in high school.
All of these stages of life come with expenses – out of my pocket!
First came the dreaded age 16 when they start driving. (Makes you cringe to think about it.)
For my family, the need to buy a car for my son was imperative because he played baseball and ran a business – we were worn out from driving him around!
Then came college at a 4-year university where he commuted back and forth to school.
… And immediately after graduating college he got married.
So, financially it was a car, then college, then a wedding. (And now there is a grandbaby…)
With my daughter, it wasn’t much different.
She went to a private high school, which for my wife Kari meant being in her SUV for over an hour and a half each morning.
So, when she was able to drive – a car was purchased immediately!
Now she is in college with 3 more years to go.
… And of course, once she graduates there is surely a wedding around the corner.
It is not much different for my youngest daughter who will be turning 15 this year and is already asking me about cars, jeeps, and trucks.
With my oldest daughter graduated from high school and my youngest not quite ready to drive, my wife Kari is once again driving an hour and a half each morning to take my daughter to school.
So, you can bet that in the next year I will be buying a car for my daughter.
OK – why am I telling you all of this?
I am sharing my story because I think cars, college, and weddings are what every parent is confronted with at some point raising kids.
There will be a lot of money spent and having money available is key to prevent you from staying out of debt (and from losing your mind).
This is real life stuff!
Now, I realize that not every situation is the same and not every family plans to buy all of these things.
There are many families who leave it up to their kids to buy their car or pay for college.
And if that is you, then you don’t need to be thinking about this.
But I do believe that if you are reading this, then you can relate to what I am talking about here.
My experiences are not much different from what you have, are or will experience yourself.
So, let me explain a few things about saving for college that you need to be thinking about.
When you Google search the topic of college savings or speak to many investment pros, you are going to hear about programs called 529 plans.
A 529 plan is a college savings program that allows for tax-free growth and withdrawals if the money is used specifically for college.
Now, the limitation to these programs is that it is limited to college.
So, when you think about cars, college and weddings, a 529 plan is not going to meet your needs or expectations for all of these things.
Another issue I have seen people who have 529 plans realize is that you have no idea how much college is going to cost.
Will they go to a public or private college? In state or out of state? Community or 4-year? Will they get a scholarship? If so, how much?
So, the question becomes, how much should someone put into a 529 plan?
Unfortunately, there is not an answer to this question, but I can tell you that you don’t want to put too much in!
So, what I have found is that parents or grandparents who want to save for these big-ticket expenses often ask for programs where they have control over the money.
Programs such as Joint Accounts, UTMA, UGMA or trust accounts give you the flexibility to spend the money however and whenever you need to spend it for the child.
Another popular strategy is to use specially designed cash value life insurance policies because of the tax benefits and possible exclusion of its values on financial aid forms. (This is not for everybody but may be a consideration.)
The point is, you have several options to choose from and shouldn’t feel limited to having to choose only one.
It all just depends on what your needs are and what you want to try to accomplish for your kids.
If you have questions about whether to use a 529 plan or want to learn about what other options you have available, let me know.
I get questions all the time from people asking about their situation and I do my best to respond within 24 hours to point you in the right direction.
Securities and advisory services offered through NATIONAL PLANNING CORPORATION (NPC), Member FINRA/SIPC, a Registered Investment Adviser. Skrobonja Financial Group, LLC and NPC are separate and unrelated companies.