I recently saw an old friend whose daughter is now a college freshman. He recalled trying to steer his daughter away from the high-priced, out-of-state, private institution she's attending by breaking down the finances. It was to no avail: “The reality is you can't expect a teenager to make a rational decision about something that's so emotional like choosing a college," he said with a shrug.
I disagree. Kids today are smarter and more mature than prior generations, especially when it comes to the issue of college costs and student debt. At a minimum, it's worth trying to get them to see the cost-benefit analysis of one school over another — not to mention a gap year, community college, trade school, or other alternatives to traditional four-year college.
Whether the answer is "We can pay for whatever you want," "Sorry kid, you're on your own," or (like us) something in between, the onus is on the parents to clearly explain the financial realities to their child. Every kid and every situation is different, of course, but my recommendation is to start having those honest discussions sometime before the end of your child's sophomore year of high school.
Funding college: The next generation
For better or worse, Davida's college funds are fairly set at this point. Now, I'm turning my attention to her three siblings: my twin sons in kindergarten and 4-year-old daughter. As mentioned above, I've opened 529 plans for each of them, and they are positioned aggressively, as time is on my side in terms of their ability to withstand market fluctuations.
However, retirement is a bigger concern now compared to when I first became a father. Time waits for no one, to quote a less famous Rolling Stones lyric on the topic.
One tactic I'm discussing with my financial advisor is funding my youngest child's college savings via a Roth IRA. The big advantage being that “if the Roth assets are not used for a child's college education, they could be used instead for the parent's retirement," according to Mahaney.
In sum, hedging my bets and exploring myriad options feels like “an appropriate investment strategy" as I think about simultaneously funding my kids' education and retirement.