Leisl L. Cording, CFP®
Senior Vice President & Financial Advisor
As a parent, you know that time with your kids can go by in the blink of an eye. So whether you are preparing to send your child to kindergarten or are dealing with teenagers, it’s never too early (or too late) to start planning for their higher education. Not sure where to start? Here are some of the most common financial mistakes parents make when it comes to college planning.
Mistake #1: Procrastinating
Raising children is no easy task. You have so much to think about as they’re growing up that college might not always be at the forefront of your mind. But the reality is, the earlier you get started on planning how to fund your child’s education, the better off you (and they) will be when the time comes.
With the impact of compounding interest, even just a couple of years can make a difference in your savings. Take the first step by using the College Savings Plan calculator in the Resources section of our website at whzwealth.com. It will help you to calculate the potential future cost and factor in how many years you have left to save so you’ll know how much money you need to save each month.
Mistake #2: Not Researching Account Types
While it’s good to have options when it comes to saving for your child’s education, choosing the right savings account can be overwhelming. Take the time to research the types of accounts that can be used to cover educational expenses. Options could include:
- 529 plans
- Coverdell ESAs
- Roth IRAs
- UTMAs and UGMAs
- Joint and individual accounts
Consider how they differ and what aspects are most valuable to you. You’ll also want to consider factors such as your risk tolerance and how much time you have left to save.
Mistake #3: Buying Investments with High Annual Fees
You probably don’t want to have to think about additional fees when you’re trying to save for a huge expense such as college. However, excessive fees can make it much more difficult to reach your college planning goals. When choosing an investment vehicle or savings account for college planning, review any potential fees that could negate or diminish earnings.
read more below
Subscribe Now to Start Living Well
Subscribe to the Fearless Flyer and get more tips and resources to help you fearlessly pursue your goals.
Mistake #4: Relying on Your Retirement Funds to Pay for College
Depleting your retirement savings in order to send your child to school is a common mistake that parents make. It’s important to think ahead, because restarting your retirement savings in your 40s and 50s is going to make it difficult to actually retire when you want to. Instead of turning to your 401(k) or other retirement savings, look into student loans, scholarships, 529 plans and other college savings accounts.
Mistake #5: Failing to Consider Student Loans
Taking out student loans does not mean that you don’t make enough money. College is getting increasingly expensive every year, and there’s no shame in taking out a loan for a little help. In fact, when it comes to federal student loans there are about 42.9 million borrowers each year.1 Research different federal student loan programs and understand the difference between subsidized and unsubsidized loans to determine if taking out a loan would work for your situation.
Even if you don’t plan on borrowing money, fill out the Free Application for Federal Student Aid (FAFSA) at fafsa.gov before sending your child off to school. It’s a quick and easy way to potentially receive aid, and you don’t have to take it even if it’s offered. Additionally, research loan types, as federal loans may offer lower-interest rates than private lenders - but this may not always be the case.
Still stressed out by the thought of starting your college planning journey? Use these tips as a jumping off point and then get in touch to create a college savings strategy as well as a comprehensive financial strategy that will help you to achieve all the goals you have for your children and for yourself. Learn more about how we do this for our clients using our strategic Plan Well, Invest Well, Live Well process and contact us at (860) 928-2341 or firstname.lastname@example.org.
Presented by Senior Vice President, Financial Advisor, Leisl L. Cording CFP®. Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. These materials are general in nature and do not address your specific situation. For your specific investment needs, please discuss your individual circumstances with your financial advisor. Weiss, Hale & Zahansky Strategic Wealth Advisors does not provide tax or legal advice, and nothing in the accompanying pages should be construed as specific tax or legal advice. 697 Pomfret Street, Pomfret Center, CT 06259, 860.928.2341. http://www.whzwealth.com