Kindergarten to College, Financial Planning for Every Step


Summer is coming to an end, which means its time for school to crank back up. Across the country, teachers are getting their classes ready, parents are buying school supplies and new clothes and students are bracing themselves for another year of homework and tests.

Now is the perfect time for parents to think about planning for their childs future education costs. Whether a child is in preschool or high school, here are a few tips to help parents maximize their college-planning efforts:

Have your financial ducks in a row. Before you even begin to worry about saving for your childs college education, it's important to make sure you have the basics covered. Parents should establish an emergency fund of savings equal to at least three months of living expenses, pay off any high-interest credit card debt and make sure you have enough life insurance coverage. Taking care of these issues will minimize your short-term financial risks and give you the space you need to safely focus on longer-term items like college planning.

Be realistic in your assessing your savings ability. Paying for your childs college can be emotional and lead you to wildly overestimate your ability to handle the future costs. We recently completed a survey about education funding and the results were startling: 60% of respondents indicated they plan on paying for college without loans, but of that group, 58% currently had no college savings accumulated!  Its time to get real. You need to figure out how much you can reasonably contribute each month to a college savings account and work from that number, not the other way around.

Estimate your potential college costs. Once you have a feel for how much you can save, its time to figure out how much college might actually cost. College costs vary dramatically, from the most expensive (elite private colleges) to the most affordable (local community colleges). To get started, use this cost estimator to get a feel for what you might be paying.

Play with the estimator so you can get a low/high range--this will help you see if a gap exists between your estimated cost range and your projected future savings.

If you have a gapdont freak out! Odds are, you will have a gap between your projected savings and estimated costs. This doesnt mean your child is doomed and you should just give up. First, its very difficult to estimate future college costs, because of the potential impact of financial aid, grants and scholarships, meaning it might not be as bad as you think. Second, its really OK if you cant pay for all of your childs college expenses.  Economists often argue that students who pay for at least some of their college costs value their education more than those who dont. If your child wants a college education, they can get it, regardless of your capacity for financial support.

Investing/Saving wisely. If you plan to save regularly for college, there are a variety of savings and investment options available to you, many of which receive favorable income tax treatment. First, educate yourself about your states educational investment programs. Options may include a prepaid tuition plan or a Section 529 investment plan. To learn more about your states options, go to College Saving 101 at

Remember, the key to successfully save for college is getting started as soon as you can and putting money away regularly. If you do this, you will build up funds to help your child pay for college. And even if you cant cover 100% of the cost, take heart in knowing that any funding you provide will help defray costs and minimize their future student loan debt, which will really help them when they enter the real world. Good luck!

Bryan Link is the CEO and co-founder of SimpliFi, Inc., an online consumer financial planning service. SimpliFi has won several awards and was named Fast Companys Top 10 Most Innovative Companies in 2010. Bryans expertise in personal finance has led to him being featured in a variety of print and broadcast media, including ABC News, FOX Business and The Wall Street Journal.