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By Teresa Stewart - August 14, 2017
For many, back-to-school time starts with photos of kids with decorative signs or entries in memory books that capture their future aspirations. It can be fun to see how the answer to "What do you want to be when you grow up?" changes over time. As your student progresses in school, it's a smart idea to expand those questions into an active conversation about college planning.
With today's emphasis on the importance of higher education, many young students may think college is a given. However, they may not realize that paying for it will be a considerable financial challenge for their families. Introducing the topic early can help set expectations and provide an opportunity to discuss options.
Involving your student in the research can pay off in more ways than one. You can get to know what type of college experience your child desires. Not everyone sees themselves at a four-year university; rather they might prefer a junior college or vocational school. This may be the case if they want to learn specific skills and start working sooner. Others may want to ease into college by taking their first two years at a junior college near home and where costs are lower. Of course, some may envision a prestigious private four-year university.
The size of school may also be a factor. Would your child feel comfortable at a large college? Is your student a self-starter and able to advocate for him or herself in a student body of 25,000 or more? Or would a smaller college with a lower teacher-to-student ratio be a better fit? Each of these options comes with different costs. Plus, discussing these considerations early can help students find a setting where they can thrive.
In many situations, parents expect their children to help pay for a part of the expenses during or after college. Consider the benefits of your student helping to contribute dollars early, so they can be invested and given time to grow. For example, if your child has a part-time job, a portion of those earnings could be added to a college fund. Additionally, kids could request relatives contribute to the fund as part of their birthday or holiday gifts.
College entrance exams may offer another way to help offset costs. Many universities will award a scholarship or tuition deduction based on ACT/SAT scores. Encourage your student to do his or her best and prepare for those tests in earnest.
Help your children understand that many of the expenses of higher education go beyond the price of tuition. There may be more to consider than they thought. Room and board make up a significant part of the bill—sometimes more than tuition itself. If your student is living outside of dorms, housing and living costs could vary greatly depending on your budget. Will your child share a modest apartment with others and cook meals to keep expenses down? Or is there an opportunity to live at home and commute?
Outside of expenses for books, fees and computers, some degrees may require specialized materials. For example, some photography or film studies may be required to purchase high-end camera equipment. Additionally, choices such as Greek life can add another layer of cost.
Planning and saving for college can be a formidable undertaking, but engaging children early gives them an important role as they have a stake in the decision. After all, understanding financial matters is a major part of the adult life and responsibilities for which you're helping them prepare.
You have several options when investing for college. We can help you compare the benefits of different college investment plans and help you find the one that fits the goals of you and your student. Call us at 1-800-345-2021 or visit us online to review your options.
Compare the benefits of different college investment plans.
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The opinions expressed are those of American Century Investments (or the portfolio manager) and are no guarantee of the future performance of any American Century Investments' portfolio. This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.