Cash The Checks

Personal Finance Blog With Advice On Making Money And Saving Money

It’s no secret that college has become an increasingly expensive way to get an education these days. With private school costs rising faster than inflation and with public schools hiking rates to compensate for debt-ridden state governments, the price of college tuition have reached new heights in recent years. Unless you are wealthy enough to cover six-figure costs or disadvantaged and qualified enough to receive large amounts of aid, it’s almost a certainty that you will graduate from school in considerable debt. Unfortunately, you may find yourself in even greater debt if you forgo a college degree in today’s job market. It’s a catch-22.

The burden posed by college is one that should not be overlooked by any young couple that is planning to have children. Even if you don’t plan on paying for your child’s college costs someday, it is still important that you help them save and that you take steps to plan your finances for the purpose of maximizing future financial aid. After all, even if the payment burden does fall on your son or daughter, the resources of the full family will be taken into consideration when most aid decisions are made.

Believe it or not, there is no better time to lay the groundwork for these plans before a child is even born. If you and your partner are at the point of having kids and want to prepare for their educational future, here are a few things to keep in mind:

Reduce Your Long-Term Assessed Net Worth

Colleges will usually consider a family’s total net worth when determining whether to provide financial aid. This net worth may include trusts, real estate investments, and the value of a small business. But it usually will not include money that has been invested in a dedicated retirement account. It will also consider a home that is fully owned far more heavily than one for which the family simply has a mortgage. On this note, even before your children are born, you can increase your likelihood of receiving aid by taking out a long-term mortgage and by investing consistently in retirement accounts.

Open a Dedicated College Savings Account

In many respects, saving for college should be approached similarly as saving for retirement. Both college and retirement reflect looming yet distant periods of time for which substantial resources are required. In this sense, you can reduce the burden of tuition substantially by regularly contributing money towards a college savings account, just as one would do with a retirement account. This process can begin even before a child is born so that it has as many years as possible to grow and to amass interest.

Keep Your Kids Close in Age

Planning to stagger the births of your children is certainly easier said than done, and many parents have personal reasons for wanting their kids to be more separated in age. But, from a college cost perspective, having multiple children in school at the same time can translate into considerable financial aid rewards for any overlapping period. Even having kids three years apart can insure one year of overlap during college – and one year of a more generous financial aid plan.

Hopefully these tips can help expectant parents start preparing for what may seem an incredibly distant event. While college savings should certainly not take priority at this point in time, having a long-term plan can help insure that your children don’t have a mountain of student loan debt down the road.

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