Saving for College: A Financial Commitment

Parents have a lot to consider when it comes to helping their children get into college. Testing and collegiate rivalries aside, high school students and their parents or guardians may feel confused or overwhelmed at the topic of paying for college. A recent study shows that the price for a private college can be upwards of $35,676 per semester while the tuition and fees for an in-state public college are about 73% less.[1] These costs do not include room, board, and other course-specific fees.


There are three primary ways to pay for college: The student’s parent or guardian pays for their tuition, student loans, or grants and scholarships. Parents or guardians who can make the financial commitment to save for their child’s college tuition can be a daunting, but achievable, task. Student loans are easy enough to obtain but may come with high fees and interest rates. Grants or scholarships, often merit-based, are always one of the best ways to obtain funding for the child’s college education, and they don’t require the student to repay or account for the funds.


As an investment in their future, parents are eager to invest in their child’s future, but many are unsure how or where to start.


Plan Early
The easiest first step is to put a plan into place early! Even if the parents won’t be able to shoulder the total tuition each semester, having a plan of how much they can afford along with other areas where they can assist, including the application process and studying for entrance exams, are all important.


529 College Savings Account
When the children are young, consider opening a 529 college savings account. These savings plans offer tax and financial aid benefits and can also be used to save and invest in K-12 tuition, if necessary, in addition to college tuition and fees. Available in almost every state, the 529 plan has two options: college savings plan; prepaid tuition plan. The college savings plan is similar to a 401(k) in that only after-tax contributions are invested. The prepaid tuition plan allows the funds to be used for use at an in-state public college or converted for use at private or out-of-state colleges.


Revisit Investments
Parents who are active investors in stocks, bonds, and mutual funds may want to ensure they are making these commitments prior to their student applying for financial aid. If investments need to be sold early, do so before the child’s sophomore year. We always recommend consulting with a financial expert to get a better look at your financial picture, including potential financial aid.


Communicate Financial Expectations
While children will not fully understand their parent’s financial situation, they will be able to help think through the application process, which schools and programs they are most interested in, pros and cons of each “top pick” university, etc. Every opportunity to discuss options and share expectations (from both parties) will allow for more open communication in the end. These discussions will help both the parent and student navigate the road between high school and college and help maximize the chances of the student’s college success!


Saving for a child’s college tuition and fees can quickly get expensive. Amid all this saving, contact EmployeeMoney to help shoulder any unexpected financial stresses that seem to occur at the most inconvenient times.




[1] U.S. News: See the Average Cost of attending College in 2018-2019