Smart Money Moves: How To Avoid Financial Missteps When Sending Children Off To College

Sending children to college can be a significant financial burden for parents, often made worse by small oversights that can add up to substantial costs. The Wall Street Journal reports.

Underestimating Out-of-Pocket Expenses

Parents often underestimate the costs related to food, transportation, books, supplies, and social activities during the college years. Deri Freeman, a certified financial planner with Prudential, highlights that food prices are expected to rise 6% this year.

“Many families underestimate the cost of food and groceries,” Freeman says. Campus meal plans can range between $3,000 and $7,000 a year, but additional spending on convenience shopping and eating out can add hundreds of dollars a month.

Setting Clear Expectations

Financial planners stress the importance of setting clear expectations about expenses. Kelley Wolfington, senior wealth strategist at SEI Private Wealth Management, recommends families create a “college contract” to clarify budget responsibilities.

“Sometimes parents are so excited about having their kid going on the next journey that these types of conversations get lost,” says Kelli Send, co-founder and principal of Francis LLC.

See Also: Can You Fund A College Education By Dripping Realty Income Dividends?

Avoiding Financial Missteps

Parents should avoid dipping into retirement funds to pay for college, as it can lead to higher taxable income and potential loss of investment gains. Kristin Fishbaugh, senior wealth adviser at Mariner Wealth Advisors, suggests researching additional scholarship opportunities, federal parent loans, private loans, and home-equity lines of credit before tapping retirement funds.

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