How To Talk to Your Kids About College Planning

By Sam Davis, CFP®, TBH Advisors

As parents, one of our greatest challenges and joys is ensuring our children’s future success. For families with soon-to-be high school graduates, February is an exciting, yet bittersweet time. As many students put the finishing touches on college applications and others frantically check the mailbox for an acceptance letter from their dream school, we are reminded of the important and valuable investment of higher education.

At TBH Advisors, we believe that proactive planning and early conversations with children about the cost and value of higher education are pivotal components to their long-term financial well-being. It’s essential for families to have open conversations around their education plans and implications for the future.

The Power of Early Saving for College 

Early education planning is not a mere financial strategy; it’s a proactive approach to shaping your child’s future. A fundamental question I often pose to families is this: “If your child is diligently working towards their educational goals, are you willing to work longer to fully fund their education?” The overwhelming response is “yes”, highlighting that for many, education planning takes precedence over retirement funding.

Therefore, starting early is crucial. Starting even as young as when your child is an infant sets in motion a series of benefits that extend far beyond the financial sphere. It’s about creating a culture in your family that values foresight, preparation, and the pursuit of educational excellence. This early start is essential in today’s increasingly expensive education landscape.

Consider setting up automatic contributions using tools such as Coverdell Education Savings Accounts and 529 Plans. These are both popular tools used to save for education expenses, but have distinct features, benefits, and contribution limits. At TBH Advisors, we’ll work with you to build a plan that is individualized, tax-advantaged, and flexible.

Laying the Foundation With Financial Discussions  

It’s never too early to involve your children in discussions that can lay a strong foundation for financial literacy. These conversations should start young and evolve as your children grow. Discussing savings, budgeting, and the basics of investing can set them up for a lifetime of financial confidence and competence, while also instilling the values of hard work and saving. Remember, these discussions are not just about numbers; they’re about instilling principles, setting expectations, and opening dialogues that can shape your child’s future financial habits.

While our children don’t need to know details of the family finances, it’s important to set an example and encourage positive behaviors such as saving and budgeting. After all, our kids are watching us in every way and determining how our behaviors fit into their own moral construct. I often meet with the high school-aged children of our clients and we discuss the basics of investing, the difference between stocks and bonds, and why it’s important to start planning for their financial future early.

Incorporating Children Into the College Planning Process

While it’s important to instill the values of financial literacy from an early age, I encourage parents to begin discussing college plans with children around 8th grade, as high school academic performance can significantly impact college prospects. Remember, it’s not just about grades; extracurricular activities count too!

When starting these discussions, it’s important to set appropriate expectations with children.

At this time, I suggest helping children understand that education at the university level is an economic tool to get an income with a profession they aspire. It’s also important to set appropriate expectations with children in regard to the cost of going to one school compared to another and the ramifications of certain financial decisions around college.

The journey of proactive education planning is a powerful testament to the love and foresight we have for our children’s futures. It’s a commitment that requires vision, early planning, and strategic follow-through. At TBH Advisors, we understand the intricacies of this journey and are dedicated to helping families navigate this path.

Don’t let time slip away. Start the conversation about your child’s education plan today. Contact TBH Advisors for guidance and begin building a future that’s as bright as your child’s potential.