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5 things to consider when it comes to your child’s college costs
It’s no secret that the cost of secondary education has increased in recent generations. While most parents are doing everything they can to be prepared for traditional college expenses such as tuition, books and housing, there are a number of costs you might not be expecting. With the right planning, you can save more, be prepared and set your child up for success.
Here are five additional college expenses that should be factored into your education funding strategy – so you’ll be financially and mentally prepared for whatever unexpected costs come your way.
Your child may return home from college a few times a year for breaks and holidays. If they attend a college that’s far away, that could mean round-trip plane tickets for each visit. If they elect to drive to and from school, that means owning a car — which comes with gas, insurance and on-campus parking. Parking passes alone can cost hundreds of dollars per year.1
There are several potential ways to offset these costs such as encouraging carpooling, taking advantage of airline reward programs and using credit card miles. You also might want to consider another method of saving, like a mutual fund, for instance. With a broad variety of funds available and no restrictions on how the money can be spent2, mutual funds could be a strategic option for supporting education savings.
2. Off-campus meals
If your child is away at college, chances are they have a meal plan, which covers most of their food needs. But there’s also the late-night slice, and the many cups of coffee it takes to sustain them through study group.
This is a great opportunity to teach your child about managing their spending. Work with them to set a monthly budget — say, $250/month for off-campus meals. You’ll be helping to instill a sense of financial responsibilitywhile minimizing the impact of non-essential spending.
3. Greek life
Many college students join a fraternity or sorority because of the camaraderie and support, lifelong friendships and, down the line, potential job connections. But, along with these benefits come application fees, chapter dues (which can add up to $1,200 each semester3) and new member fees, sometimes totaling up to a few thousand dollars.4 Joining a sorority or fraternity also means attending a lot of social events, from fundraisers to formal dances.
Explore whether their chapter offers scholarships5 and payment plans which could help you spread out your cost.6 And think outside the box when it comes to things like fancy outfits for events, such as considering a clothing rental service.
4. Study abroad
The chance to study abroad is an amazing, often life-changing opportunity. A semester abroad involves a number of different expenses however, including program costs, airfare and cultural experiences.
There are several ways to help mitigate the cost of studying internationally, starting with program selection. Rather than your kid focusing on the most popular study abroad destinations7, suggest they consider locations with lower costs of living and more favorable exchange rates which could help stretch the value of the dollar.
To save on foreign transaction fees8 during the semester, maybe they can look into opening an account at a local bank, consider a credit card without exchange fees, or talk to a financial advisor about how to start saving as early — and as much — as possible before they even set off.
5. Switching majors
About a third of students change their minds9 after declaring their majors. Switching could mean not only the price of a new set of books, but possibly extra semesters in order to fulfill required credits. There’s also the chance your child will want to switch to a major their current school doesn’t offer10, or that their new area of study will necessitate post-graduate classes.
A 529 savings plan can help greatly offset the financial burden of additional schooling. A 529 plan is a college savings plan that can work in concert with financial aid and allows an investor to contribute after-tax dollars for qualified higher education expenses.11 These expenses could include fees, books, housing, meal plans and tuition — whether for undergraduate, vocational, trade or graduate school.
Another occasionally overlooked tool for college savings is a Roth IRA account. While most people typically associate Roth IRAs with retirement, they’re actually a great option for college too. While deposits into Roth IRA’s don’t receive tax deductions, the accounts do grow tax deferred. Withdrawals from IRAs, including Roth IRAs, are also exempt from withdrawal penalties if the funds are used specifically for qualified educational expenses – such as tuition and fees.12
With careful planning and preparation, you can make your children’s college dreams a reality.