In a recent edition of Home Economics, the writer shared that one of her money stressors was trying to figure out how she and her husband were going to pay for their daughter to go to her dream college. While her husband earned a $300,000 base salary with a $175,000 annual bonus, the couple did not have much in savings and zero set aside in 529 accounts for their three kids. Because of their high income, their daughter did not qualify for any financial aid.
Unsurprisingly, there was some concern from readers in the comment section about the couple’s decision to prioritize their children’s education over their own retirement and emergency fund. The Home Ec raises a question I think a lot of parents ask themselves regularly: How much can and should I spend on my kids. Arguably, this couple can afford the big tuition bill. But should they pay for it?
But the story raised another question for me: At what point should you start talking to your kid about the cost of college and how much you can and are willing to pay?
College is expensive. That’s a simple fact, and one that strikes fear into the hearts of many parents who wonder how the hell they’re going to afford to send their kids to their dream university one day. Even with 18 years to save, four-year, in-state, public universities cost more than $100,000 on average—a number that will likely rise with inflation (if not faster than inflation). And with all the competing expenses—from child care to groceries to gas to housing—it can be harder than ever to set aside savings for such a far off goal.
Millennials and Gen X arguably feel more anxiety about college costs than our Boomer parents because many of us have spent decades paying off student loans. (And let’s not get bogged down with the existential question many of us are wrestling with about whether college even matters in the age of AI.) Our experience with student loans gives us the opportunity to be more savvy with how our children approach their own college opportunities. It’s up to us to set their expectations and help them navigate this very big, very expensive decision.
“These conversations need to start early,” says Patricia A. Roberts, cofounder of Gift of College and author of Route 529: A Parent's Guide to Saving for College and Career Training with 529 Plans. You don’t want to find yourself in a situation where your child has worked incredibly hard to get into their dream school only to find out that the only way they can afford to attend is if they take out student loans, she says.
Patricia is not only an expert on this topic but also the mother of a 20-something who graduated from college and graduate school debt-free. Their family made setting money aside in a 529 a shared goal from the time her son was a small child.
“Parents can comfortably discuss this long-term goal with their kids, since it relates specifically to the child, and it’s not abstract,” says Patricia. You should be having this conversation by at least freshman year of high school, she says, but it can be easily had at earlier ages. You don’t want to wait until your child has their heart set on a college you’re not sure you can afford.
As your child gets older, and the college decision gets closer, it’s important to have more explicit conversations where you discuss hard numbers. Be open about how much you have saved and how much you’re able to chip in beyond that. Talk about how your child might contribute, and if they need to get a job to help cover expenses. Discuss how student loans work, and whether you as a parent are willing to cosign loans. Pull up a college-cost calculator and run the numbers. Have those harder conversations about career goals and future salaries. How will that impact their ability to pay off any loans?
Parents need to really educate themselves on exactly what college costs and what options are available, Patricia says. The brand-name schools are expensive and do a hell of a job marketing themselves. Community colleges and smaller state schools can still provide stellar educations for a fraction of the price. (Side note: I love this old edition of Home Economics, where the writer shared a little bit about how she managed to send both her kids to college debt-free despite having limited resources.)
Patricia shared the story of a Brooklyn family she met whose daughter wanted to attend New York University (which has a sticker price of $91,138 per year for tuition, and room and board). Her parents convinced their daughter to spend her first two years at a local community college, and then she transferred to NYU for her second two years (while still living at home). When she graduated and decided to go to law school, her parents were able to help with those costs as well because they had saved so much on her undergrad education.
I’ve been thinking about 529s and the cost of college a lot lately, in part because of all the work I’ve been doing with Babylist. A 529 is a pretty cool account with so many tax benefits. And while it has a bit of a bad rep (so many people worry about being penalized if you don’t use the money for college), these days the funds can cover so many educational expenses beyond a four-year college degree, including paying for vocational school.
Freddy is only nine, and I don’t even like to think about him leaving us to go off to college. But in chatting with Patricia, I feel inspired to start talking with him more about the money we’re saving for his future, and maybe even getting him involved more by encouraging him to set aside some of his allowance toward this shared goal. It seems like a perfect opportunity to start having meaningful conversations around personal finance topics like saving, investing, and compound interest.
I can see why parents might feel awkward having those initial conversations with your kid about the cost of college and how much you can afford. But what if we reframe it as an opportunity to empower our kids and teach them about money at an early age? Financial education is so much more interesting when you apply it to your own life. And understanding big expenses—like college tuition—from a younger age will allow your child to be savvy about other financial decisions they make as they move into adulthood.
If you’ve got older kids, are you talking to them about the cost of college? If you’ve got younger kids, do you have a 529? What else regarding paying for college would you like to see us cover on The Purse?
