JUSTUS MORGAN: Plans for your children’s education can change over time

By Justus Morgan
For The Journal Times

Wednesday, September 3, 2008 10:04 PM CDT

That right of passage that occurs every fall is once again upon us: It’s back-to-school time for area children. Whether it’s your child’s first year in kindergarten or senior year of high school, it’s a good time to re-examine your commitments to your children’s education.

A leading goal for many parents is funding their children’s college educations. To support this goal, there are as many funding vehicles, tax deductions and financial aid packages as there are schools from which to choose. Before looking at specifics, my recommendation is to begin with an education funding strategy. This will help ensure your college funding goals align with your other financial life objectives.

As is the case in setting any goals, until you are sure about what you want to accomplish, the number of options can be overwhelming. An education funding strategy defines what the parents’ expectations will be for their role, as well as the student’s financial and nonfinancial role in education. Having the strategy clearly defined first will better enable you to make good choices about how you will meet your children’s financial education needs.

Most parents think of the cost of college as the endgame for setting aside money for education. While this certainly is an important milestone, there might be other equally important educational considerations that parents should take into account. For instance, if a child is struggling in school right now, investing in tutoring would be more appropriate than setting that money aside for a future college expense that might never occur if the immediate need is not addressed. As the educational needs of your child change over time, so might how you execute your strategy.

To assist with formulating a strategy, here are some questions to consider:

n What were the parents’ experiences with education funding? Who paid for their expenses, if any? This will influence how parents make decisions about how they will or will not contribute to their children’s educational funding.

n How much do parents expect their children to contribute? What resources will this come from (work, savings, loans, scholarships, grants)?

n Will there be any expectations for student performance to receive parents’ financial assistance? For example, some parents establish a certain expectation around the grade-point average that must be maintained in order to receive funding. This is also common in company-sponsored reimbursement plans.

n What are parents willing to pay for before college for education expenses (tutoring, summer school)?

n How do parents plan to pay for their contribution amount (income, savings or loans)?

n How will parents’ contributions to education expenses affect saving for other goals (such as retirement)?

The education funding strategy is not something that can be created and then set aside without periodically reviewing it as circumstances change. A parent’s strategy for a child in first grade most likely will need some revisions by the time the child graduates from high school. Only after a strategy has been defined should parents look at tactics to support the plan. Following is a list of resources to assist in identifying which tactics might be most appropriate. Your financial adviser can also help you in developing an education funding strategy that fits with your overall financial life objectives:

n FinAid! (http://www.finaid.org) — financial aid advice.

n Saving for College (http://www.savingforcollege.com) — information about 529 college savings plans.

n EdVest College Savings Plan (http://www.edvest.com) — Wisconsin’s 529 college savings plan.

Having a clearer picture of responsibilities and attitudes toward the goal of funding education will go a long way toward making the goal achievable.

Justus Morgan is a certified financial planner with Financial Service Group Inc., a registered investment advisory firm in Racine, on the net at

http://www.toyourwealth.com

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