Inspiring your kid’s personal college savings goal
When college is looming six or less years away, it may be a great to time to inspire your kid to start planning and create their own college savings goal. So many kids get money in many ways - $20 dollars from their grandparents as a gift, making money from their lemonade stand, earnings from helping to shovel snow for their neighbor, or wages from cleaning the pool. So talk about savings a portion of these funds for life shaping goal - college.
Start a College Planning Conversation
College savings and planning should be a family affair. Ask you kid their thoughts about careers they are interested in, majors that will be useful to this field, and then potential colleges. Next, research college costs of those potential colleges. This is when you can talk about how much you have saved towards college and create a family plan to fund their education. According to a study by Fidelity, 69% of families adjusted their plans after having this sort of conversation with their kid. When you start to break down the costs and what resources you have now to pay, it often makes the case to save more now.
Savings Now Versus Borrowing Later
In that same Fidelity study, 81% of don’t want to their kids to be heavily burdened with student loans. If you feel the same, then tell your kid.
Based on a 10-year repayment at the current interest rates, $1 saved translated into $1.50 that you don’t have to repay.
So, ask your kid to set their own goal to college savings to limit the amount needed to be financed. Perhaps it is a third of each dollar they get put into their college savings account. Perhaps it is monthly savings goal of $20 based on their current savings. Perhaps it is a goal of $125 by the end of the year. Whatever the metric they decide, cheer them on. Don’t pester them frequently about the goal but periodically celebrate their success with it. Did they give you an amount to transfer online to their savings account or 529 plan? Then, give them a shout out. If your kid can make deposits themselves, then subtly check deposits quarterly and mention positive savings growth over your lasagna dinner.
With the rising college costs, borrowing may still be inevitable. Just encourage being an informed consumers maker smarter decisions and better students, and, if necessary, better borrowers. Talk about what is a reasonable amount of student loan borrowing and what is a hefty amount based on your career goals. Tools like the College Scorecard and Center for Education and the Workforce at Georgetown University have tools that help you understand debt loads at colleges as well as your long-term potential earnings.
Colleen MacDonald Krumwiede is a financial aid and paying for college expert with over a decade of financial aid experience at Stanford GSB, Caltech, and Pomona College and another decade at educational finance and technology companies servicing higher education. She guides go-to-market strategy and product development at Quatromoney to transform the way families afford college.