Get the Kids Involved in Saving for College

Physician's Money Digest, September 2006, Volume 13, Issue 9

The World War II generationgot a taste of highereducation through the GIBill and made it a pointto supplement or paytheir kids' tuition. It was a struggle,but a far more manageable one than itis in this day and age. In 2005, figuresfrom the University of Texas showedthat since the 1960s, the price of a publichigher education has risen fromabout 5% of median family income tomore than 17% today. Based on thecurrent pace, that number could rise to30% of median family income by2020, and private universities couldapproach 50%. Scary numbers indeed.That's why it makes sense for familiesto make college affordability a familyeffort, with both parents and kidspitching in.

But there's a bright side to involvingyour child in the process of saving forcollege. They'll get an early educationin money decisions that will have adirect impact on their future. The followingare ways to make sure you'rewell informed about the college savingsprocess and how to involve your child:

•Get advice as early as possible.Even if your child has only a shorttime until high school graduation, getadvice tailored to your own situationfrom a financial planner. Parents oftenforget that their first financial goal isretirement planning, not college saving,so they need to start by askingthemselves what they will need to supporttheir retirement, and what theycan contribute to their child's collegefund based on time to retirement andto freshman year. Parents also need tokeep in mind the best savings strategiesfor themselves and their child based onthe tax situation for both.

•Involve your child in the discussion.Armed with knowledge fromthe financial planning process, starttalking with your child about theirfinancial contribution through moneyfrom part-time jobs, savings, or, as alast resort, debt after college. Parentsmight decide to schedule two advisorymeetings with a planner: one for themselves,and a second one with the child.

•Tackle the FAFSA first. Thedreaded Free Application for FederalStudent Aid (FAFSA) is a necessity forall parents who believe there will besome shortfall in paying for collegeafter savings, grants, and scholarships.It's a good idea to fill it out even if yourneeds aren't immediate, as familyfinances can change for the worse.Your child won't qualify for federal studentloans until you fill out this form.To expedite the process, get your taxesdone as early as possible in the yearyour child will need the funds. Collegestypically dole out money on a first-come,first-serve basis, so you'll needyour income documentation in order.

Once the FAFSA is processed, theDepartment of Education determinesfinancial need and the parents' expectedfinancial contribution (EFC). If parentscan't cover the EFC, the studenthas to come up with a way to close thegap. To get an idea of what your EFCmight be, visit

•Start looking for free money.On the community level, you might findcorporations, associations, and othergroups that offer scholarships andgrants for local students, particularlythose going off to state or local schools.Students can generally find out aboutlocal opportunities through their highschool guidance counselor. If the studentworks for a company on a part-timebasis, there might be college supportthere. Also, the College Board Website ( features agood online clearinghouse for scholarships,grants, internships, and loans.

Reprinted with permission from the Financial PlanningAssociation (, the membership organizationfor the financial planning community.