Hello and welcome to another Jackson and Peck Financial Group Podcast. My name is Darrel Peck and today I wanted to discuss some thoughts on college planning.
The release of this podcast comes in the month of May which is a big time in the lives of all graduating high school seniors. The decisions they must make are many and the opportunities for all of them are vast. We know some will enter the work force right away, some will enter a trade or apprenticeship in welding, or become an electrician, or maybe a plumber. And many will go on to college. Today, I would like to discuss the path for those that plan to go to college and some planning ideas for them.
Now, when we are born, whether you believe your children are destined to be a doctor or nurse and have many years of college ahead of them or you believe your child is destined to follow in the footsteps of both of your blue collar parents and go right into a labor intensive job, the truth is we really don’t know what the future holds for them. And what is truly important, in my opinion, is that we give our children the best chance possible to be the best they can be at whatever the choose to become. If my daughter decides she wants to be an auto mechanic, well then I want to help her become the best auto mechanic she can be and support her the best I can. If my son wants to be a neurosurgeon and wants to go through years of post secondary education and have the entire alphabet listed after his name, then my job is to support him and help him reach is dreams.
Now lets rewind back to the day your child is born. I still vividly remember when my son was born 18 years ago. If you know me well you may have heard me talk about the day we left the hospital and the nurse placed him in our car and shut the door and we drove away. Thoughts run through your head like, holy cow, I have to take care of this person now, or now we have to do the midnight feedings that the nurses did the last two nights. That was pretty scary back then but now than he is off to college in the fall is terrifying. Hopefully we did the best we could to prepare him for this next phase.
Planning for college starts at a young age. Like I mentioned before, we truly never know what our children will become in life but planning should begin as soon as possible. And like the great Mike Tyson said, a plan is great until you get punched in the face. All plans may change at some point but if you don’t have a plan, you could be left wishing you had one.
So lets start at the beginning. When a child is first born, many times we discuss planning for college. 18 years seems like a long time but I can tell you from experience, it goes by fast. One popular planning tool is a 529 plan. This plan is designed specifically for saving for college expenses. Money goes into a 529 plan with after tax money and if withdrawals are used for qualified education expenses, the interest is tax free. For example, if you put in over the life of the plan, $30,000 and it grows to $80,000, then the $50,000 of interest is not taxable if used for education.
Many times we discuss life insurance as well. As devastating as it would be to lose a child, and eventhough they may not contribute financially to the household, there are costs to consider in the death of a child. Funeral expenses would be one expense but also covering any debt that may be incurred relating to college expenses. There are times parents use money from their own accounts to fund college or take out parent loans and the death benefit would help recoup those expenses if, god forbid, something happen to a child.
As children get older and enter elementary and middle school, it’s important to provide them with as many life experiences as possible. Maybe a hike on a trail makes them think about working in a career outdoors or maybe getting them involved in sports allows them to earn a scholarship to a university. Maybe taking your child to work to show them what you do everyday would allow them to see if a career path similar to mom or dad is right for them. Kids can take in a lot. Let them soak up the world.
Once a child gets to high school, they may have changed their career goals from being Spiderman to wanting to become a nurse or deciding maybe being a dinosaur when I grow up doesn’t make much sense but I would like to learn more about being a teacher.
Freshman year can be a heavy transition year for them but a very important one. With all the pressures of society, peer pressure, social media, being accepted, these will all be daily struggles, keeping focused on education goals is important. I remember when my son was a freshman and I told him, now grades matter. Now keeping score is important. Time management is important. This is your chance to get involved with extracurricular activities like Key Club or student government. There is a possibility that through one of these clubs, they could find their passion in life. This is a good age to take a look at career planning tools. There are resources available that will ask questions based off of certain characteristics in careers that may be of interest to you. This may help you narrow down a potential career choice and provide direction in courses to take in high school, colleges that may specialize in that career, and maybe an internship or job shadow opportunity that can help you decide if this path is right for you.
Sophomore year sneaks up pretty fast. This is the year they should take the practice SAT to get them ready for SAT’s next year. There is a possibility they may show in interest in a particular career choice or maybe even a college they are interested in. Many high schools allow students to take college credits at this time. This is a great way to take care of some general study credits that are required in college. And this is the perfect time to mention a website called transferology.com. This website is a handy tool that allows you to see if these college courses will be accepted at a particular school your child is considering. There is nothing more frustrating than paying for a class that is not accepted as transfer credit. This is also a good time to become familiar with FAFSA requirements. I say this because this is the tax year that will be considered when you complete this form for their senior year. So, if any creative tax planning needs to be considered, this is the time to do it. There are FAFSA calculators online as well so you can run scenarios if you wish. The summer after your sophomore year may be an excellent time to obtain a job close to a career choice you are considering or looking into an internship or job shadow opportunity.
By the time they are juniors, if they have not researched many college choices, this would be the time to start. Specifically at Wethersfield in Kewanee, you are allowed one college day excused absence and in your senior year, you are allowed 2. Many times, students will visit college campuses in the summer as well as the weather might be more cooperative than in the early spring or late fall. At this age, there may be some scholarships you should research or even apply for. This is also the year they would take the SAT. It is often recommended they take it twice, once in the spring and again in the fall. This is also a time that if you did start a 529 plan for you child, you may want to consider reducing the aggressiveness of the investments. What recent volatility has shown us is that there are many issues that can impact volatility. From inflation, to wars outside our own country, to covid, etc. When it comes time to take withdrawals, it may make sense to be somewhat conservative in these investments.
For their senior year, there is much going on. Here are some things your child should be considering….
- College visits and applications. Make a list and try to begin narrowing down choices. You may start to get offers in the mail very quickly and you can start to compare packages.
- Financial aid. In the state of IL, the FAFSA is a graduation requirement. The FAFSA is available October 1st.
- Get letters of recommendation. You may need multiple letter of recommendation from faculty, staff, employers, or other influential community members.
- Apply for scholarships. Seek out your guidance counselor and find out which are available and start applying. There still may be scholarships available from COVID funds.
Thanks for listening in. Be sure to follow us on all major social media outlets and visit our website at jacksonpeckfg.com. If you have any comments, feedback, or something to add, please definitely reach out. Also, we are always looking for ideas on future podcast topics. If you have one, shoot us a quick email. We’d love to hear from you guys.
Christian Jackson is a Registered Representative of and offers securities through Royal Alliance Associates, Inc. and Darrel Peck is an Investment Advisor Representative of and offers securities and investment advisory services through Royal Alliance Associates, Inc. Member FINRA/SIPC. Royal Alliance Associates, Inc. is separately owned and other entities and/or marketing names, products or services referenced here are independent of Royal Alliance Associates, Inc. 121 S. Main Street Kewanee, IL 61443. Phone number 309-761-8139.