When you’re working with a family that has young children, it can be really powerful to involve the children in the conversation. That’s because most parents still have the desire to send their children to college. This can require a lot of strategy and even some tough decisions.
Encouraging your clients to include their children (at least at a certain age), can be a critical piece of the puzzle. Not only can it help adults learn the true cost of college, yet it can also encourage kids to take a more active role in the saving process. It may also encourage kids to be more proactive in looking for scholarships, make compromises, and even choose a different path–all of which is important to do well in advance of senior year.
Rising Tuition Costs
It’s unlikely that all college debt is going to be eradicated any time soon, just as it’s unlikely that college is going to be free. And clients certainly shouldn’t hang their hats on that hope. When it comes to college savings, it’s wise to prepare for a big expense, otherwise, clients might just under-prepare.
At this point, college costs are predicted to rise about 8% each year. This may sound negligible, yet 8% is pretty significant when you consider the current college costs and the compounding effect. At an increase of 8%, college costs are doubling over a 9-year span. So if your client starts saving for college upon their child’s birth, college costs will have quadrupled by their 18th birthday.
Current Student Debt
As of last year, the country’s combined student debt reached $1.7 trillion, split between 44.7 million people. Average loan payments for student debt are around $300. For some time now, it’s been a challenge for people to save for and afford college, contributing to this student debt problem. It’s become so out of control that debt is a normal part of higher education.
While the ever-increasing student debt is certainly an issue, there’s more at play. The other issue is that college is still widely considered the right thing to do. Parents don’t question whether or not their kids will go to college, they simply expect them to. And kids aren’t being included in the conversation about their own futures. This can lead young teenagers to take college for granted, without recognizing the toll it takes on their parent’s finances, or the true financial obligation they agree to when they sign loan documents.
This puts parents and young adults in a tricky situation that isn’t serving anyone.
Bring Students to the Table
The point of this discussion isn’t to convince parents not to save money. It’s actually preferable that they do–savings creates options and opportunities. (And as a bonus, if they use whole life insurance as a savings vehicle, their money can multitask for many different purchases and purposes.)
In reality, encouraging clients to bring their children into financial discussions can help students:
- Understand what their parents have (and don’t have)
- Visualize the true cost of education, and how that can impact their parent’s retirement savings
- Take ownership of their future; to have “skin in the game” by saving their own money, getting better grades, seeking scholarships and grants
- View college as a serious decision and not a given
- Appreciate their parents contributions
- Discover an alternate path to success, like starting a business or going to a trade school
Inviting children in, rather than leaving them out completely, can help your clients raise more financially literate kids. It can also incentivize kids to take more responsibility for the things that they want in life. While you probably don’t need to invite the kids for every meeting, it can make a huge difference to talk about college with the whole family.
The Power of Savings
As mentioned earlier, savings creates opportunities. Using whole life insurance as a savings vehicle can help your clients save much more efficiently, because they can use and replenish the money over and over again for multiple purposes.
They may even wish to open a policy on their child specifically and use it to teach their child how to save and replenish their own cash-value account. The children can use their policy like a bank to take loans for the things they want, and then pay them back. This may help them finance their first car, and can even help them pay for college in the future.
The fact of the matter is that college is only getting more expensive. Your client is likely to have more favorable results when they include, rather than exclude, their children from the conversation. It’s never too early for your client to start teaching their children financial literacy, and you can be an advocate for that.
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