College funding strategies for the Affluent Student

At the Affluent Student, we take a hybrid approach to the intimidating goal of funding college for your children.  In this blog, I will outline the parts of our plan, which you’ll see differs at various points from the conventional wisdom.  One thing you will not see is loans or some other form of credit.  When you look at today’s cost of college, and the fact that tuition hikes nationwide average 8% annually (according to the FinAid website), it is a daunting number to come up with for one child.  Here are some of our recommendations to get as close to this goal as possible, whether you choose to pay for your child’s college education or not.

1. Begin saving.  No matter where you are in the process or how old your children are, begin saving.  You can use a 529 plan or an educational savings account (ESA) to get tax-favored treatment of your college savings, but that locks in any savings to be used for qualified educational expenses only.  You might instead choose to invest in a non-educational account to retain flexibility with how the money is used.
2. For children younger than high school age, we recommend that you use a mutual fund or other investment vehicle to get some solid growth.  Once they reach high school age, any future savings should be routed into a money-market or other savings vehicle.  For each year leading up to their freshman year in college, 25% of any investment savings should be moved into the same savings vehicle.  This strategy protects any investment savings without possibly pulling out all of the investment at a low point in the market.
3. Read to your kids.  Do homework with them.  Let them play learning games on the computer.  Solve problems with them.  Your involvement with them at this point will help you identify their learning style.  Continue to do this in preschool and all the way through high school.
4. Work to identify your child’s skills and abilities, passions, visions, dreams, and personality traits and tendencies.  Use this to help them in their college choice and educational major.  Continue to refine and develop that throughout their teenage years.
5. Teach your children about money and how it works.  In elementary school they can grasp the basic concepts of working to create money, giving, and saving for a goal.  In middle school begin to expose them to some of life’s realities like how much it costs to live and how to put together a working budget.  In high school, give them more freedoms with their money and help them open a checking account with a debit card.  Show them how to handle a check register and how to balance their checkbook.  Talk to them about credit, loans, and the real-world impact of using such tools.
6. Get to know your child’s teachers.  Regular feedback and dialogue with your teachers will help you identify areas of strength and opportunities for improvements.
7. Address your child’s weaknesses head-on.  Identify their learning style to help them in areas where they may be struggling.  If necessary, get them help early on with tutoring, counseling, or even medical help. 
8. Setup a proper reward/consequence system to reinforce the right behaviors based on what works for your child.
9. Use middle school as a training ground for high school.  Help your children develop the skills and behaviors that they need to be successful in high school and college.  Allow them the opportunities to make non-fatal errors and learn from their mistakes.
10. Together, plan your child’s high school curriculum in such a way as to meet all of the requirements to get into college and to maximize their potential for success.  Generally you have leeway to choose some electives and to choose whether Advanced Placement (AP) or college-prep courses are best for them.
11. Set the expectations for your children as to how much you’re willing to pay and what is expected of them.  That will help them greatly in terms of college choice.
12. Encourage your children to work.  As they should be learning whenever you teach them about money, work is a sure-fire way to get the money to do the things that you want.
13. Investigate the in-state schools that offer your child’s major or something very close to their major.  Put together a budget for each of your top three schools on that list and compare that to what you’re willing to pay for and establish how much gap your children have to cover at each school.
14. Identify the merit scholarship opportunities available at these schools.  As mentioned in an earlier post, these are automatic scholarships that are awarded based on grade point average and entrance exam scores. 
15. Take your chosen entrance exam at least twice, preferably three times, using the study plan and schedule outlined in my earlier post, Entrance Exams.
16. Apply to at least the top three schools on your list at the beginning of your senior year of high school.  Be sure to send your test scores to each and complete any scholarship applications for the school prior to December 1 of your senior year.
17. Search for scholarships outside of your chosen schools and apply for as many as you qualify for.  (Hint – all of those 2-inch thick scholarship books that they print each year are finally useful at this point in the search).

There are a lot of steps here, but they aren’t all to be taken at one time.  Some may not even seem like financial strategies, but these behaviors lead to a better student, which positions them more favorable for scholarship dollars.  Some are natural acts of parenting, but as with any goal you hope to achieve you have to be intentional in order to be successful.  Putting these strategies together will help your child to be in the best position to leave college debt-free.