April is Financial Literacy Month. As financial planners, we are passionate about helping clients, their children, and others in our community increase their financial literacy skills. Given that May 1st is also Decision Day for college acceptances, we thought it’d be timely to share our thoughts on how families might discuss the cost of college with their children.
Too often, families don’t share how much they have saved for college or can afford with their children as they go through the college admissions process. This can set the family up for difficult conversations if their child gets accepted and has their heart set on a college the parents can’t afford. To avoid this difficult situation, we recommend the following:
- Get clear on how much you can afford. Either work with a financial planner or crunch your numbers to clarify how much you can realistically afford to pay for college without jeopardizing other important goals like retirement. Consider how much you’ve already saved, how much you currently spend to support your child, and any other likely resources (e.g., grandparents, child assets, etc.) Don’t forget to factor in if you have other college-bound children.
- Get clear on your expectations of your child. Before talking to your child about how much college you can afford, get on the same page with your partner about the expectation of how much you expect your child to contribute, if any, to the cost of college. Do you want them to have skin in the game or instead focus on getting good grades? Will they be expected to work part-time to cover some of their expenses? Would you like them to take on a reasonable amount of loans? Who will pay for graduate school or a 5th or 6th year of college?
- Have a college money talk (or several) with your child. Before they get too far along in the college admissions process (maybe by Junior year at the latest), sit down with your child and talk openly and transparently about how much you’ve saved, how much you feel you can realistically afford , and what your expectations are for their contribution. If your budget doesn’t allow you to pay for any school they might get into, be clear with them on expectations. Many colleges offer generous financial aid, so you might encourage them to still apply to some expensive schools with the caveat that they might not be able to attend if they don’t get enough financial aid. Once they’ve been admitted and receive aid offers, sit down with them and compare what each school will actually cost net of merit and need-based aid. You can then decide as a family which college is the best financial and academic fit for your child.
Being open and honest with your child about what your family can realistically afford to pay for college and what you expect their contribution to be can help take some of the stress out of a needlessly complex and stressful college selection process. College money conversations have the added benefit of teaching your child about how to make important financial decisions and will help set them on a path to being a financially responsible adult.