Financial Independence Week: Paying For Your Child’s Education

As a parent of a young child, I’m already struggling with the question of whether or not I should pay for my child’s post-secondary education, and how much I should pay for if I do. To put it simply, there is no easy answer to the question; if you were hoping to be told what to do, look elsewhere. Instead, here are several important points to consider if you’re thinking about how to handle financial commitments for your child’s education.

There is a solid case for no support at all. My parents gave me almost no financial support after I left for college outside of housing and food during my first college summer (the only one where I returned to my hometown). Is this better or worse? I don’t know for sure, but I do know that as a mature adult, I have some powerful reflections on the college experience from a financial perspective that I would not have now if I had financial support. Don’t assume that you have to save for your child’s education; instead, ask yourself what is right.

Start saving now. Every day you delay is a day that it will be harder to pay for your child’s education. If you’re going to pay for it, start now, even with small amounts. Open up a 529 college savings account so the earnings are tax-free (if used for educational purposes) and set up an automatic deduction plan so that your money goes into there automatically each week or month. This way, it will just quietly build up over time until you’re ready to use it.

Save equally for all of your children. I started my son’s 529 just before he was born and I put the same amount in it each month, along with contributing any cash gifts he receives (at least as an infant and as a toddler). If I have any children, I will do exactly the same thing for them. Just to make sure it is truly equal, I adjust the amount I deposit on an annual basis for inflation, so although my son’s earliest payments are smaller than my future childrens’ earliest payments will be, his college costs won’t be quite as great because he will attend college earlier. As far as I am concerned, the money in this account is his; it will be used first for college expenses – and if he doesn’t need it then, it will be given to him for post-graduation things like a home down payment. The same will be true of any other children I might have.

Don’t punish a child for success. If one child works hard and earns a scholarship, that child may be resentful if you then decide that you don’t have to pay for any of their education, but then spend tens of thousands of dollars educating that child’s sibling. What do they learn? That hard work doesn’t really matter because someone else will just step in and level the playing field anyway. Being unequal to your children can build resentment and misunderstanding. Keep what you’ve saved for that child for graduate school or, in the event that they do other things, transfer that money to them in another fashion. If you simply must do this, have an open family meeting about it with everyone involved; if you’re unwilling to do that, then you need to do some serious soul-searching about larger family issues.

Similarly, don’t reward a child for failure. If one child works like crazy to earn a lot of financial aid, while another child laughs it off, don’t reward the second child with the lion’s share of your educational savings. Just because one child is resourceful and a hard worker and another child is not does not mean one child should be given more than the other.

Be open about what you can give. Never, ever dangle a carrot in front of your child that isn’t really there. For example, while I was in grade school and junior high, my parents said that if I got into a college, they would “help me out a lot.” Well, when I finished my sophomore year in high school and got some very strong scores on my college exams and it became clear that college was in my future, they suddenly admitted to me that they had nothing at all for me and that their promises were merely a carrot to try to convince me to work harder at school. This was one of the largest disappointments of my life and it led to a short period where I basically didn’t care about getting into college at all. Never put your child into that situation.

In summary, decide early what you’re going to do, be equal and fair about it, and be clear to your child exactly what they can expect for aid.