Home     Financial Goals     Retirement Planning     Insurance     Funding Education     Estate Planning     Bankruptcy     Inflation     Resources     About Us      
Calculate the cost     How financial aid works     Financial aid programs     529s, coverdell & more      
Education funding                                                                                                                                
 

Deciding to pay for your children’s education is one of the largest financial burdens a family will face.  Even the richest people in the world must pay special attention when deciding to pay for their children’s college expenses.  The reason is because every family has unlimited wishes but limited finances.  There are very few people in the world that can do everything they want when they want. 

 

This is why it is so important to determine your financial goals before determining to fund your children’s education.  Only if funding your children’s education ranked higher in your goals than your retirement should you begin funneling money towards it.  Otherwise, your focus, and your money, should be working towards satisfying the higher goals.  Once you have a game plan to reach your higher goals, you can measure how much money you have to fund lower ranked goals.  This can not be stressed enough; too many people end up with a handful of unattained goals.  They end up with ½ their retirement money, ½ their education money and a pile of debt to close the gaps.

 

 

Two different approaches 

 

There are basically two scenarios families fall into:

 

  • Those that want to know how much school will cost, and what tax 

              favorable saving plans / tax credit are available to help them.

  • Those that know how much they can put away and need

              to know how much schooling their savings will cover.

 

Some families are in the situation that they can save money for their children's college, but they don't know how much to save.  These families should calculate how much to save so that they don't over save for college and possibly negatively effect their retirement or other goals.

 

A lot of families are not in the situation where they can calculate the total cost of college and just start saving the required amount.  These families only know how much they can put away per paycheck without missing payments on other bills.

 

Regardless which situation your family is in, you should start by calculating the total cost of college and the monthly saving amount needed to get there.  Once you do this, you’ll have a clear picture of what you have to work with.  Even if you can only save $50 per month, do the math and generate an understanding of the total cost for your ideal ending.  That way, while you are saving the amount you can, you know how short of your goal you will be.  By knowing this short fall, you can attempt to close the gap with Grants, Scholarships, Tax Credits, Loans or taking less expensive courses in one college than transferring to the main school for the desired degree. 

 

For those families who fall into the category of just not knowing the amount to save, or the tax advantages of different saving programs, start with calculating the cost college and then move onto the tax portion of paying for college.

 

For those who are working with a set budget and know how much they can save, read our section on calculating the cost college, determine if you will be able to cover the cost; and if not, read how financial aid works, what aid and grants are available, and then the tax portion of saving for college.  Then work on closing the gap with: Grants, Loans, Tax Credits, and ECT.

 

The most important thing is to have a goal and face your current reality.  Most people never want to face this.  They would rather ignore reality and just work hard and hope everything works out.  Unfortunately, if you don't acknowledge the difference, you can never create a game plan to close the gap and reach your goals.

 

A great resource to refer too when planning for college is Collegeboard.com.  The site is filled with many aspects of college that should be referred to when planning.

 

Visit our Site Map