Walking through the airport in mid-August, I was surrounded by swarms of families saying their goodbyes as their teenagers embarked for their freshman college experience. Lingering hugs and tears—parents sending kids off to their next chapter, with lots of fears, hopes and unknowns ahead. I could empathize with them (been there, done that.) It’s a mixture of emotions that leaves you feeling happy, sad, worried and excited all at the same time. You ask yourself—have I given my kids the tools they need to navigate the next chapter of their lives without being under my roof?
And there’s the financial component. One less kid at home means you’ve lost a grocery bill, maybe some costs for gas, but the budget has just expanded exponentially: besides tuition and room and board, the cost of books, room furnishings, clothes, transportation, medical plans and all the extras that go well beyond the bill from the Bursar’s office. It can be a financial pain that keeps on giving, especially if you have younger children in the pipeline.
According to savingforcollege.com, the projected cost of those enrolled in 2013 for private colleges is $129,700 for four years of tuition and fees. College tuition and fees are expected to rise at 5% annually, which means, if you have a child today, that bright little package all diapered up and adorable could cost $312,200 for the same four years. And that’s not including room and board, books, supplies, equipment and transportation.
These numbers could shift the meaning of the buckets full of tears I witnessed at the airport security gates. So what do you do? How can you possibly make this happen? It feels incredibly overwhelming and in fact, it can be. Here are few things you can begin to do if you haven’t started planning.
1. Do your research. Understand the options and differences between private education, state schools and even community college.
2. Prioritize. How high up on your list is funding college and to what degree? Depending on your age, earning ability and financial situation you might have to make choices between funding retirement and funding college.
3. Start. Don’t wait, even if you only have small amount of money to put away. Look at the 529 College savings programs available and their applicability to your specific circumstance. Be mindful of costs involved in these plans. Do not write the check until you understand what you’re getting into.
4. Work with a professional fee-only planner who can help you understand the numbers and how it fits in your overall financial plan. If it is a part of your financial goals, make sure it is integrated properly.
5. Don’t use “Cruise Control” when it comes to savings for college. Keep track of developments and changes in loans, scholarships, financial aid and college cost increases. According to The College Board®, the average 2013-2014 tuition increased at 3.8% at private colleges and 2.9% at public universities. While this is better than 5%, it is still higher than normal inflation.
6. Be real. I have heard many parents exclaim a variation of “nothing is more important than sending Johnny to Harvard, and then paying for six years of medical school! It’s a good thing we’ve signed him up for Mandarin classes after his Aikido training and Harp lessons!” By the way, Johnny is three. Planning is great, but touching reality is pretty good too. Goals-based planning encompasses a lot of areas including risk management, retirement planning, tax planning, estate planning, cash flow and investment planning. So your scope of thinking needs to be expanded into all areas of financial responsibility.
It touched me deeply seeing these families all huddled together, laughing and crying and lovingly holding on to each other—fending off the inevitable goodbye. The sacrifices made to make this moment happen were, in many cases, considerable. As I watch the students head into the security line, I wished them luck with all my heart for the great adventure ahead of them. As I watch the parents, trying to bravely hold it together, I see their looks of fear and hope. The hope includes one that they are financially prepared to fulfill the dreams sparked today.