Are you saving for college yet?
Once you become a parent, you ultimately take on the financial responsibility of seeing your child become an adult. And one of the most expensive endeavors that your child will undertake is that of a post secondary education. This is just one reason that there are so many financial programs available for parents to help fund their child’s education. According to financial experts, parents should start saving for college in the first year of life in order to be financially prepared to pay for college when the time arises, perhaps through a custodial account. But if you have not put money aside and your child is growing up quickly, there is no need to be alarmed. In fact, more than half of all parents cannot afford to save for college while they are raising children. Certainly, this makes finding the money much more difficult when the time comes, albeit possible.
The question is, should parents pay for their child’s education? Do children strive harder when they are responsible for footing all or part of the bills that are involved in a college education? Or is not paying for your child’s education simply a reason for your child to not complete college?
As of 2010, the breakdown of how families funded college was as follows. 37% of parents used savings or annual income to pay for college. 23% utilized grants and scholarships, while 24% combined parental and student borrowing to come up with collegiate loans. Around 7% were able to secure funding from friends and relatives and a sheer 9% left the financial responsibility up to the student.
Obviously, children growing up in richer homes, with annual incomes that exceeded $100K per year were more likely to have their education paid for by parents. According to a Sallie Mae Gallop poll, wealthy children were very rarely responsible for any college expenses. Those with moderate and low incomes almost always relied upon the child to either secure funding or grants and scholarships to pay for college.
One of the reasons that so many parents feel responsible for paying for college is because it has been hyped to give children an edge in life. For many years, this was true – nothing quite trumped a college education. However today, there is a lot of research that seems to indicate any post secondary education is important – especially if it involves the learning of a trade or skill. In fact, in 2010 – folks who were trained in specialty trades actually had more job security and were more financially sound than those that relied upon a college education to land a job. In any recession, often the first employees to be let go or to have their salaries reduces are the highest paid, most educated employees. And replacing these lost jobs in a sea of applicants that all have college educations has proven to be a difficult task in today’s job market.
And parents that may start out feeling inclined or even pressured to pay for their children’s education realize when college arises that they also have to plan for their own futures. Many financial analysts actually encourage parents to spend more time planning their retirement than their children’s college because college is so easily funded by loans, whereas retirement is not. And as parents get older, they start realizing what they will need to live comfortably in retirement. By opting out of paying for all of the college expenses, searching for loans, grants and scholarships – parents can be more suitably prepared for their own old age and retirement. The hope is that by the time a parent is ready to retire, their children should be quite comfortable in lives of their own.
And there are a lot of parents who believe that with autonomy comes responsibility and that children must learn how to take care of themselves and manage money. Many parents realize that when there is no loss or consequence for a college freshman who sees the experience as a joy ride rather than as an education, that the children are less likely to try and make the most of their time in college. Shift the financial responsibility to the children, all or in part – and suddenly they feel more inclined to do better academically. And, when kids borrow for college, take their education seriously and career plan and build while they are in college – most can be living debt free by the time they reach 30. However, it can take parents the rest of their lives to build up the savings they spent on college and prepare for retirement.
Luckily, there are a ton of options for funding college. From student financial aid, to loans, scholarships, grants, and state educational assistance; if there is a will there is a way to pay for college. Whether you, as the parent shoulder the financial responsibility in its entirety or partly is definitely a completely independent choice that will likely be based on your life circumstances as well as your children’s. All in all, it is a strong idea to make sure that your child has responsibilities of their own while they are in college. If you agree to pay the tuition, then your child should be responsible for room fees, books, or food bills. If you allow a child to go for nothing and never expect anything in return, it is simply human nature that they won’t be able to wholly appreciate their post secondary education and may not strive as hard to make their educational pursuits successful.