According to the Pew Research Center, roughly three-quarters of all families have more than one child. Therefore, advice about saving for college should include scenarios that require supporting multiple children on the road to higher education.
Unlimited Love, Limited Resources
By Jayne Deutmeyer, Certified Trust & Financial Advisor (and mother)
While we wish we could give our children everything they want, the truth of the matter is that we all have limited resources to work with. In my experience over the years, it is often inevitable that children of my clients with larger families are required to take on more of the cost of their education than those with smaller families. It makes sense.
Whether you will have multiple children in college at the same time or need to plan for one-at-a-time for the next decade and beyond, consider the following tips for making the most of the resources available to you:
Set expectations early.
It’s much easier for a child to get into a saving-for-college mindset at the age of 12 or 14 than to spring it on them as a junior in high school. The prospect of coming up with that kind of money for a 17-year-old will seem overwhelming and may influence them to not pursue education beyond high school. Putting the conversation off will not usually improve the situation, but can almost certainly make it worse.
Focus on FAIR versus EQUAL.
As a society, fair tends to mean exactly the same. On the contrary, that’s the definition of equal. I encourage your family to have a discussion about offering the type of support each child needs (fair). For instance, perhaps each child will need to get a job to help save for college (fair), but each child may not be able to earn the same wage or work the same number of hours. Or, if your children are spread apart, giving them the exact same amount may not make sense since tuition costs may go up substantially over the course of 5-10+ years between the oldest and youngest.
Take advantage of financial aid.
Your Expected Family Contribution (EFC) gets shared among all children attending college at the same time, so each child’s financial aid package is based on their own portion (half or third, etc.) of the total EFC for that year. Multiple children in college simultaneously should mean additional opportunities for need-based scholarships, grants, and loans.
Consider non-traditional sources of funding.
If out-of-pocket savings (cash) and financial aid offers don’t cover everything, parents may need to dig deeper by looking at other possibilities. Perhaps a second job could fill the gap for a few years. If you own a home, a Home Equity Line of Credit (HELOC) or second mortgage may be an option. Check with your employer about the possibility of borrowing against your 401K. It also may be possible to pull money out of a traditional or Roth IRA. Talk to your financial advisor to make sure you understand the impact these routes may have on your retirement or other finances.
As always, starting early is helpful, but starting any time is better than not at all. Use open communication to set expectations and stay on the same page with your college-bound children.
Watch for more information on planning for college expenses each month in this newsletter. If you would like help in planning appropriately for college tuition, contact firstname.lastname@example.org or call (608) 798-5233.