Education is undeniably one of the most cherished gifts we can offer our children. It provides them the tools and knowledge they need to navigate the world and cultivate a prosperous future. However, as any parent knows, planning for this future isn’t always straightforward.
The Philosophy of “Skin in the Game”
My wife, Trudy, and I have always held a particular philosophy when it comes to our children’s education. We believe in ensuring they have what we term “skin in the game.” It’s essential for them to understand the value of their education and contribute to it. This philosophy poses two critical questions for parents: How much financial support are we willing to provide, and up to what educational level are we prepared to fund? These questions invariably lead to the more daunting query: How much is it all going to cost?
According to current financial planning tools, the estimated cost of education for a newborn today ranges between $150,000 to $250,000. It’s a staggering amount, and it brings us to the pivotal question: How do we fund this?
Exploring the Funding Options
There are essentially three paths parents can embark upon:
- Do Nothing: This approach places the entire responsibility of financing their education on the child. It’s a decision that allows children to find their own way, but it might not be the ideal choice for everyone.
- Set Up a Taxable Account: This method seems promising. However, there’s a catch. Once the child turns 18, they gain full control over these funds. They can choose to use it for their education or spend it as they see fit. It offers flexibility but doesn’t guarantee the funds will be used for educational purposes.
- College Savings Plan: This is the avenue Trudy and I resonate with the most. The college savings plan not only earmarks the funds specifically for education but also allows us to maintain control over the assets as they grow. The cherry on top? If these funds are used for educational purposes, they are tax-free.
The journey of providing for your child’s future is both rewarding and challenging. As parents, we want the best for our children, but it’s equally vital to make informed decisions that align with our financial goals and those of our child. If you’re pondering over how to best support your child’s educational journey, reach out to us. Together, we can devise a plan tailored to your aspirations and your child’s future.
This article is for educational purposes and should not be considered as financial advice. Always consult with a financial advisor before making any significant financial decisions.