It is normal to want to help your kids as much as possible. What that means looks different for different families. For some people, the goal is to fully finance college, while others expect to provide a more minor contribution. Regardless of how much or how little you plan to contribute to college for your kids, there are things you can do to ensure you are making smart choices for your family.
Set Up a 529 Plan
If you do plan to contribute to your child’s education, set up a 529 plan. You can deposit money directly into this account rather than placing it into a regular savings account. There are tax benefits to saving this way, but it is important to understand that it is for school expenses. You can run into unnecessary expenses and red tape if you need to access the money for anything else. Because you deposit the money tax-free, if you withdraw the money for anything other than educational purposes, you will have to pay taxes on that withdrawal.
Encourage Your Kids to Work
Summer or after school jobs during high school help your child realize how rewarding it is to have their own money. This habit comes in handy once they head to college. If they are in an intensive study program, working during the school year may not work out, but colleges generally have work-study programs with very flexible hours that are designed for students. If your child is comfortable with working more hours than what is available through work-study, they can get a job in the community. While they may not be able to make a huge contribution to their tuition bill this way, they can use their income to cover books, groceries, and other incidentals. Working as a resident advisor is another way to make college more affordable. While this job is generally not available to first-year students, it is a great way to cut your room and board bill once you qualify.
Student Loans Offer Favorable Rates
It is a rare situation where students can attend college without taking on at least some student loan debt. This doesn’t have to be scary. Interest rates on these loans are low, and repayment terms are favorable. The financial aid office where your child plans to attend school can also help you and your child negotiate this process. Be sure that you encourage your child to fill out the FAFSA during their senior year of high school so they know what types of aid are available and they can make arrangements for their loans at the start of their freshman year of college. Another option is to attend a free community college in your local area.
Don’t Neglect Your Own Needs
As a parent, you want to do what is right for your child, but it is important that you not neglect yourself. If you pay for 100 percent of your child’s education at the expense of making contributions to your retirement account, you are not doing your child any favors. There are no loans available for retirement, while there are many options available for paying for college.
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