Educating Your Kids Can Be a Real Education
Posted by Laura Nelson on August 1, 2009
By James J. Renn,
Chief Executive Officer, Lisle Savings Bank
Many alternatives exist today to fund college education for your children:
1. Pay as You Go. This might have worked when college students were wearing tie-dyed T-shirts. Now the cost of four years of education at some private schools approaches the cost of a home. Only wealthy families can afford this.
2. Let Your Child Pay for It. Well, that approach may teach self-reliance, but what lawful part-time job pays enough to offset $20,000 to $30,000 a year?
3. Get a Scholarship. This plan works well if you qualify for aid or your child is a great athlete or student. While scholarships, grants and the like may not be a viable solution for everyone, do not discount them entirely. Many are available for students who have or will commit to providing community service.
4. Borrow it. This worked really when the government was making below market loans not based on financial need. Rules have tightened considerably, although loans may be a viable option for some. If Mom and Dad are going to borrow the money, consider whether they really want a new long-term debt obligation later in life.
5. Get the Money from Grandpa and Grandma. Works well if they have the money, don’t need it to live and are willing to give it to your kids. Otherwise, it’s best to plan.
6. Pay Now. Learn Later. Several states have programs allowing parents to make lump sum payments to a trust fund to guarantee tuition at an in-state school for four years. But what happens if your child goes out of state or decides he/she just doesn’t want to go to college? These and other drawbacks need to be examined.
7. Save Now. Pay Later. A systematic program of savings and investment may be old-fashioned, but it works. You have to decide whether the savings will be in the parents’ name or the child’s, as the decision carries both tax and non-tax ramifications. Next, consider tax-advantaged savings vehicles such as a 529 Plan or a Coverdell Education Savings Account. Lastly, utilize investment alternatives that suit your style and risk profile.
Lisle Savings Bank is a hometown community bank with two locations: 1450 Maple Avenue and 4720 Main Street, Lisle. Contact them at (630) 852-3710 or www.lislebank.com.
Tags:Money
