My three-year-old daughter, Dawson, has been learning her ABCs, and for the very first time, on Sunday, she wrote her name. My wife and I were so proud. We awed over her, as parents tend to do, because we wanted her to know just how well she had done. She even got a piece of candy! Her face beamed with pride as she lifted the piece of paper to share her newest accomplishment with us. My wife captured the moment with her camera, and we instantly had yet another memory to stick to the refrigerator door.
Coincidentally, last Sunday was Easter Sunday. There was an Easter egg hunt at church, an Easter egg hunt at home, followed by an Easter egg candy-feast when it was all over. In the midst of the feast, I asked my daughter if she could spell, ‘Easter’. She grinned through a mouthful of candy and said, “Yep… D-A-W-S-O-N.”
It was at this point that I realized our crucial error: Dawson now thinks every time she spells her name, she should be rewarded with Easter egg hunts and a candy feast. Oops!
As parents, we all strive to avoid the “crucial errors”. Unfortunately, children don’t come with an instruction manual, so moms and dads are left to make the tough decisions on their own. Decisions like private school vs. public, or spanking vs. time-out are just a couple of tough decisions that have been driving us crazy lately.
Of course, there’s never a shortage of advice. More experienced parents are rarely bashful about offering theirs, but I’ve yet to see two sets of parents who have raised their children the exact same way. Over the years, there have been two consistent words of wisdom offered to me, and I’d like to share those with you today.
The first: We’re often advised to hold on to these early years; they say, “Before you know it, they’ll be grown up!” Morgan and I have done our best to hang on to the present by taking thousands of pictures and videos, but time just keeps slipping away. It’s hard to imagine, but I know that in 15 short years she’ll be holding a diploma with the same proud smile on her face. And, in all likelihood, she’ll be looking to mom and dad for financial support in college.
The second: “Start saving for college.” As a financial planner, I have fully embraced this one. Morgan and I have chosen to save for our children’s college education in 529 education accounts. As you may already know, 529 accounts grow tax free; however, there are several other benefits that you may not be aware of.
One of the key benefits is that 529 accounts are controlled by you, not your child. So, if your child turns 18 and wants to spend the money on something other than college, you can keep that from happening. Another plus is that you can change the beneficiary of the account to another family member, or even use the money for your own education if you’d like; it’s left entirely up to you.
Given the dramatic increase in tuition over the years, it’s no wonder that saving for college early is consistently encouraged. CBS news recently reported that, over the last ten years, “Real net average tuition at state universities, which is the price after grants are deducted, rose 33.1%”. As tuition costs continue to escalate beyond the pace of inflation, parents can be caught flat-footed if they don’t plan appropriately.
I recently received an email from clients Bob and Susan Schlein, whose daughter was offered a five-year guaranteed fellowship to a PhD program at Princeton. He wrote, “To say that we are excited is to vastly understate the issue!” He’s a proud father, just as I am.
Whether it’s your three-year-old who is just learning to spell her name or your 22-year-old who is going off to Princeton, it is important to help your children plan for their future. Give us a call if you’d like to discuss a college savings plan.