3 Financial Matters to Discuss With Your Kids When Saving for College

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It’s important to talk about college costs in depth. Here are some key points to hit. 

When your kids are still in diapers, it’s hard to imagine them ever being old enough to pack up and leave for college. But it’s also important to start saving for college when your kids are young. Ideally, you’ll invest that money, whether in a traditional brokerage account, 529 plan, or even a Roth IRA, to grow it into a larger sum over time.

And these days, with long-term CD rates being pretty high, it’s not a bad idea to keep some of your college money in the bank, especially if your kids are already in high school and college isn’t so far off. That way, you won’t run into an issue with that portion of your college savings if the stock market takes a wild turn for the worse in the coming years.

But while it’s important to do what you can to save for your kids’ college education, it’s also important to set expectations and talk about how far that money can go. Here are some key points to touch on when having those conversations.

1. Review the differences between in-state and out-of-state tuition

The type of school your kids choose will make a huge difference in the cost of college. U.S. News & World Report says that for the 2023-2024 academic year, the average cost of tuition and fees at a public in-state college is $10,662. For a public out-of-state school, it’s $23,630.

And then of course there’s private college, which is a whole other world. The average cost there is $42,162 for the current academic year.

It’s a good idea to review these costs with your kids, so they’re not set up for disappointment. Your children may start to fall in love with small liberal arts schools in quaint towns with a $60,000-a-year price tag. If colleges like that are out of reach, you’re better off saying so upfront.

2. Discuss working while attending college

Working while attending college is a great way to bank cash and offset some of the costs involved. And it might make an otherwise too expensive school attainable if there’s a pressing reason to go there.

But working during college isn’t easy. In that scenario, there’s the pressure of reporting to a job on top of taking classes, pursuing internships, and getting involved in extracurriculars.

Your kids may be willing to work during their studies — before they realize how that might result in a world of added stress and less time to socialize. So make sure to review both sides of the coin.

3. Run through the costs your kids will face outside of tuition

Paying for college doesn’t just mean covering tuition, fees, and books. There are additional expenses to think about, the obvious ones being room and board and transportation.

But there’s a less obvious expense to consider as well — entertainment. If your kids are excited to go off to college and enjoy a new set of surroundings, they’ll need to work the cost of visiting local eateries and taking day trips into their budget.

One thing you may want to emphasize is that the more you spend on actual tuition, the less money your kids will have left over for the fun stuff. So that’s a balance they’ll need to strike.

It’s definitely important to save as much as you can for your kids’ education. But you should also make sure to have open conversations about college before your children become high school seniors. That way, they’ll have a better idea of what to expect, and they might have an easier time deciding which schools to apply to once that time arrives.

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