Financial Answer Center
It is time to develop a specific plan on how your whole college-funding program will come together. Work with the high school guidance counselor to take advantage of their services. Consider using a service that matches up your child and his or her background with a college that meets his or her needs. Accompany your child on site visits to schools. Be specific as to what portion of college costs will be paid for by investments, financial aid, loans, scholarships and other sources. Identify any funding shortfall now so you can plan for it. If you haven't finished researching these key areas, get started on them now.
- Work with your child to decide on the type of school he or she will attend (two-year, four-year, public, private, etc.). See the section on The Cost.
- It is too late to get any significant investment benefit out of a college investment program; however, it still makes sense for you to invest money monthly as part of your overall college investment strategy. If you are going to start a monthly investment program, open a bank account. Short-term or intermediate-term bonds also may make sense. You may want to avoid growth or stock investments due to the volatility of such investments.
- If you have already been investing, it may be time to start selling long-term growth investments and putting that money in lower-risk, short-term investments such as bank accounts. The focus now is to make sure the money is there when you need to pay the college bill. You should consider no longer taking the risk associated with long-term investments. Selling investments will change your taxable income and may cause you to pay more taxes; but the overriding issue is to make sure your money is more liquid. See the sections Developing a Funding Strategy and Investment Vehicles for more information.
- If you are investing monthly, you still need to decide who the owner of the investment account should be.
IMPORTANT NOTE: If you think that you will be applying for financial aid, it is best to invest the money in an account in your name.
- There are several tax-advantaged ways to save for college. See the section Saving Taxes to determine which investment may be right for you.
- Open a college investment account and begin investing on a monthly basis. See your bank or credit union's investment representative, who can help set up the right type of account.
- Consider making a gift of appreciated stock or other investments to your child. When your child sells the asset, depending on the "kiddie tax" rules that apply, they may pay tax at their tax rate (assuming the child is at least 18), which could be lower than yours. However, this may impact the probability of receiving financial aid.
- Where will you be able to borrow money if you need to? What is the best way to borrow? Get the loan applications and find out, from your lending sources, exactly how much they will lend to you. Many people borrow to fund college costs, the trick is to get the best deal and tax deductions (if you are eligible). See the section Parental Loans for Learning.
- Apply for financial aid, if that's appropriate. Have children apply for scholarships. Make sure you meet all the deadlines. See the section Landing Financial Aid for information on the financial aid process. Also see the section Federal Loans and Grants for grant and loan comparison charts.
- Develop a plan to use other resources that would be available to pay for college. See the section Other Ways to Meet College Costs.
- Have your child start the college application process. If he or she has one favorite school, discuss the pros and cons of applying for early admission at that school alone. Your child will take college entrance exams, narrow down his or her list of schools, prepare school applications, complete essays, ask for letters of recommendation, etc. Work closely with the high school guidance counselor to make sure you're not forgetting anything. If you're applying for student aid, you'll need to fill out the FAFSA (Free Application for Federal Student Aid). Most schools will also use this form to determine which students they will be offering scholarships to.
- Start talking to your child about budgeting and managing money.
- See the "Putting It All Together" worksheet to help you determine where the money is going to come from to pay for each year of school.
Securities and insurance products are offered through Osaic Institutions, INC., Member FINRA/SIPC. Osaic Institutions, INC. and FB Wealth Management, a division of First Bank, are not affiliated. We do not provide tax advice. Consult your tax advisor.