Your Kids Are Geniuses. Save Anyway.

By: David Smyth, August 1, 2019

It's that time of year when some of you are preparing for your kids to leave home and head to college instead of just dropping them off at high school. And if you have younger kids, this is often when you'll come into our office and start asking what you should do to get ready for the ever-increasing cost of a college education.

Depending on the age of your young geniuses, there are a few different strategies I recommend when it comes to college savings.

Let's start with your high school seniors. Folks, if you haven't saved anything at this point, it's probably time to look into loans, and any work/study opportunities. Our team can help you sort through the loan options out there to keep the debt burden as low as possible. (We'll also remind you to start saving for your own retirement.)

Say your youngster is around the age of 10. This is a great time to set up a 529 college savings plan and let the money build and grow over the next eight years. Keep in mind that any family member - grandparents, rich uncles - can contribute money to the plan as well. The money grows tax-deferred and is tax-free if you use the funds for qualified educational expenses. At this age, you probably have a pretty good idea where your kiddo is on the smarts scale, and most little leaguers won't be going pro in their chosen sport. So start saving.

Now, for those of you who have a newborn in the house, you want to start saving now because little Einstein is definitely going Ivy League. That's great! However, the first thing I usually tell new parents to do is increase their life insurance coverage, since you now have an actual extra mouth to feed (and protect). Once that's taken care of, it's a good idea to go ahead and set up a 529 college savings plan and automate a certain amount into it each month. I'll usually run some numbers for clients at this point outlining what that little bundle of joy will cost when it comes to college, and trust me, I understand the sticker shock - I have three! I know we're all certain that our kids are gifted and special and will change the world, and I will never argue with parents on this point. I can't tell you at birth if that baby's genius will translate into money for college, and of course it is possible that your baby will be the one who gets a full ride sports scholarship or becomes the scientist who finally finds the cure for cancer. 

I accept that plan, but I'm also coming from a family where my oldest, Gates, wanted to be a Panda Protector when he was 3. There's no scholarship for Panda Protectors as it turns out. Heck, all he needed was a gun! 

In all seriousness though, I do run into parents who are afraid they'll overfund their kids' education funds. I'll tell you this right now - I have never seen a single client overfund their child's or grandchild's college savings by more than a grand or two. I've seen dozens if not well up in the hundreds of families who significantly underfunded a college account. As a reminder, many states now allow 529 funds (up to $10,000) to be used for certain K-12 expenses, and if there is money leftover after college graduation, the money can be used for a sibling or cousin as well. 

To wrap up, the most important step in saving for college is to just start down the path. Our team can help you plan, whether you're envisioning private liberal arts or public education, whether you want to pay for the whole shebang or just help out a little, and what other costs you plan on covering. We can give you an estimated number and help you decide on a monthly or annual amount to automate. Just give us a call. 

Family Financial Partners | Growing Wealth, For Generations ™