As a lawyer, estate planning consultant, and writer, I talk to a lot of parents about planning for their family’s financial future. And I’ve noticed that certain questions come up over and over again, regardless of how many children you have, how much you make, or where you live. With that in mind, I’m excited to share some of them with Mainstream Mom readers over the next few months. I hope that they will help inspire you to think and talk about these important issues, because the Happiest Parent is the one who plans for their child’s long-term well-being, no matter how hard it may seem today.
1. We really can’t afford to donate to our daughter’s college fund this year, but I feel so guilty if we don’t. What should we do?
First of all – and seriously, make this your new year’s resolution – try not to feel guilty about saving for college.
According to online calculators and the most recent data, raising a child in this country costs somewhere between $200,000 and $250,000 – and that’s after taxes, and before you factor in the price of higher education. It’s perfectly normal for a family with young children to feel pinched from time to time, and for the price of college to feel like a big dark cloud looming in the distance.
But here’s what I tell every parent: the very best way to save for your kid’s college tuition is to live within your means today and to pay down any high interest debt you guys may have. And what better time to set up a new financial game plan than in January – the beginning of a brand new year and the perfect opportunity for a fresh start to your family’s long-term well-being?
So before you worry about stashing money away in a tax deferred college savings plan, make sure you and your husband have set up a realistic household budget that allows you to have a comfortable safety net for any unexpected expenses that may arise for 2012 and make sure you have a plan to keep as much off of the plastic as possible going forward.
I know it’s incredibly hard with young kids to get out in front of the curve (they always seem to need something, right?), but there’s no sense in getting single-digit interest on a college savings fund when you’re paying double-digit interest on your credit cards.
One more suggestion: consider asking your relatives and close friends to make a contribution to your child’s college fund instead of gifts on special occasions this year. $25 and $50 dollars on birthdays and holidays, here and there, may not feel like a lot, but in 18 years it could easily add up to thousands of dollars to help out with some of your kid’s college costs – like textbooks and meal plans. And trust me: everyone will appreciate the financial gift much more in the long run than more toys or your games your son or daughter will outgrow before you know it.