FUNDS Balance
Take advantage of current job security to plan your kids’ future
Most people want to help their children pay for a quality college education, but it can be difficult to balance personal financial goals and funding your kids’ educational aspirations. When retirement savings is sacrificed for college costs, it can be a disservice to the entire family. To help determine the best way to pay for your kids’ college, while funding your retirement savings, Farnoosh Torabi, a personal finance expert offers five smart tips:
Tip 1: Don’t put retirement on the back burner While funding your children’s college education is important, your retirement savings should take priority. Strive to contribute 10 to 15 per cent of your takehome pay toward retirement savings. The reality is college is four years and retirement can be 30-plus years. Tip 2: Involve your children in the college cost discussion College is expensive, so make sure you discuss the overall costs with your children, and what you’re willing to contribute. Have them help in researching financial aid and scholarship opportunities too. Remember, you want to find a school that’s the best fit — so don’t let the initial “sticker price” scare your children from applying. Some private colleges may give the best aid packages, but other times they may not. Don’t make assumptions and always keep your options open. The goal is to find the college with the best value.
Tip 3: Don’t take on more than you can afford While involving your children in the discussion, it’s also important to make sure you’re not setting them up for failure when they graduate. As they research student loan possibilities, make sure they’ll be able to comfortably afford payments once they graduate, and that they’re not taking on too much debt. Make use of online resources and tools to find out student loan options in the destination of your choice. This will help you understand how much you’ll borrow, how many years of schooling are left, whether you want to make payments during school or not, etc. This shows your child what repayment will look like under each option, so you can both be clear on the details and agree on a game plan. Tip 4: Consider the college savings plan that’s best for you Consider opening a bank account that allows flexible spending towards higher education. Whether your child chooses to forgo traditional college education, or not require the funds that are set aside, you can easily change the beneficiary to another child or relative. Tip 5: Don’t become the “bank of Mom and Dad” You want to help your kids, but once you set the precedent that it’s okay for your children to ask for money (or a contribution toward college), they may feel they can frequently approach you later in life for funds. Don’t set the tone that you’ll always be there to financially support them. You want them to grow wings so they can fly independently (and so you can happily enter retirement and enjoy those golden years).