Did you know that high school students are actually skipping college to avoid the dreaded student debt? USA Today published a report back in April 2013 about how younger generations think that a college education is no longer a guarantee to have a successful life. Instead of putting themselves through debt, they are aiming for a more simple dream through service related businesses like washing cars or something similar.
Having seen how student debts are ruining the lives of several graduates, you are probably thinking about how you can save your child from the same predicament. You may even be paying off your own loans as you are reading this article. And your parents may still have these debt obligations. Try not to make it a 3 generation problem in your family. You can save your child from the burden of student debts with a bit of financial planning and smart preparations.
Costs that student loans cover
Student debt usually covers the tuition and fees alone while some people apply for a bigger amount to cover everything that will be spent while living on campus. But usually, people only consider the tuition fees, room and boarding expenses. But there is more to college costs that these. You have to consider this if you want to be completely prepared for all these and thus keep your child from having to put himself/herself in debt just to get a higher education.
Here are some of the things that will help you compute for a more comprehensive college cost estimate.
Academic related costs. These costs include the textbook and school supplies like notebooks, pencils, scissors, calculators, etc.
Basic necessities. These include clothing, shoes and other accessories that your child will need to appear presentable as they attend their classes and other college functions.
Electronic gadgets and devices. This includes computer/laptop, cellphone, printer, TV, DVD player, stereo and other devices that will help keep your child occupied when they are not in school.
Lodging needs. These include bed sheets, pillow cases, bath towels, laundry basket, bookcase, chair and other furnishings. It gets higher if the dorm or apartment where your child will live is not fully furnished.
Toiletries. These are bath/shower essentials, personal hygiene products, laundry and cleaning supplies, and other kitchen appliances (e.g. mini fridge, coffeemaker, etc).
Transportation costs. This will be higher if your child does not live within campus grounds or at least in the surrounding area.
Food. This will probably a big part of their expense as you do not want your child to skip meals just to make ends meet.
Cellphone and cable subscriptions. You want to be able to get in touch with your child regularly and the cable subscription will help keep them entertained at home. You may want to include these.
Health insurance. A health insurance will assure both you and your child of protection and finances in case of accident. Ease your stress by opting to get a health insurance.
Entertainment expenses. A teen will be a teen and they need to unwind just like everyone else. You want to help them keep the stress at a manageable level so make sure to budget for their entertainment.
How to prepare for college fees
Preparing for college fees involves saving and equipping your child with financial management skills. There are several online calculators that you can use to determine how much you will need to save up for college. About.com and CNN Money both have comprehensive college cost calculators. Collegesavings.org can also help you compute and estimate the costs you will face with your child when they reach college.
Here are important steps in helping you prepare for college fees.
Step 1: Get the most accurate estimate of college costs based on today’s rates.
Simply get an estimate from your preferred college. Discuss this with your teenager to narrow down the list of colleges that they want to go to. This is usually in the Financial Aid portion of the college/university website.
Step 2: Factor in the inflation rate.
Costs continue to rise and you want to make sure your calculations factor in the inflation rate. The usual rate is 4-6% every year. That means, a tuition of $20,000 for a private college education will cost $20,800 to $21,200 next year.
Step 3: Start coming up with a plan to grow your savings for college.
An excellent to make saving up for college easier is to save an adequate amount of money and invest it. Cut back on your expenses and see if you can make your child chip in. Have them work part time every summer or during school weekends. It is best to give them a taste of money management issues to help them develop the right financial skills like budgeting and saving. Pool all of these in and when you have reached your target amount, invest it.
Step 4: Choose the right investment.
When you want to invest your money. It is best not to put all your eggs in one basket when investing. That way, if one investment gets compromised, you still have other investments. Choose investments that has the same inflation rate as your college cost estimates.
Step 5: Monitor your college fund investments and keep on saving.
As you watch your investments grow, you need to continue saving as a backup financial plan for your teen’s college education. If they end up not using it, you can add it to your retirement.
The lynch pin in all of these preparations is your child’s ability to manage their own finances. Despite your aid in growing their money for college, make sure you make them responsible for these funds. In the end, you will both benefit because your child will be assured of the best education that you can afford and you don’t have to work your back off trying to finance what you child will need in a few year’s time.