Using the College Planning Process to Springbaord Messages About Values and Financial Literacy
Hi, thank you for tuning into today’s Emerald GEM, which stands for Get Educated in Minutes. I’m Jerry Inglet, a senior family legacy advisor for Wilmington Trust’s Emerald Family Office and Advisory and your host for today’s podcast. In today’s GEM, I will provide depth and details on how to leverage the preparation and decisions connected to choosing and paying for college as a process that not only helps to create an informed college pathway, but also simultaneously serves as a springboard to discover and introduce measures of financial education that incorporates family values connected to money and resources.
Let’s begin by imagining a world where your young adult children have the knowledge and practice necessary to independently make quality financial decisions. In addition to these skills, envision them with the ability to carry a conversation about resources in a manner that is confident, informed, value-laden, appropriate, and mature – and all of this is reflected in their day-to-day management of money and resources as well-engaged and motivated contributors to the world of work and charity.
As a parent, I imagine that this all sounds dreamy - and it is possible to get there – but it often requires an intentional effort from parents to uncover and take advantage of moments during a child’s upbringing to incorporate financial discussions and lessons. These critical moments, whether it is the thought behind providing a child an allowance, the inclusion of children within acts of charity, reflective discussions that require children to evaluate their discretionary purchases, or some other effort - the possibility of incorporating financial education and, in some cases, appropriate transparency from parents, is there for the taking. One such milestone and life cycle decision that can connect these dots in so many ways is the emotion-laden roller-coaster of choosing and paying for college.
I’m going to share with you four examples of the applicability of these college planning conversations …
- First, as the aspiring college student begins to build their initial college list, usually around sophomore year of high school, a family can utilize the college scorecard website that the US Department of Education provides along with the net cost estimators that are found on the websites of many universities to gain an idea of the estimated costs a family may incur to attend that college. With an idea of the estimated costs in hand, parents can complete conversations on budgets, scholarship opportunities available and paying well before the senior year of high school. The purpose of this pre-emptive conversation is multi-fold – first, if you wait until late of senior year to have these financial conversations, it may be too late to apply for certain scholarships and if there is any financial constraint, the disappointment of getting into a college followed by the budget conversation on the back end will be much more difficult than setting these parameters early on. Also, depending on if the parent desires or needs the child to have skin in the game with student loans, you can make this transaction more tangible by reviewing loan repayment tools that calculate and project student loan payments well before the child steps foot on the college campus. To deepen this conversation even further, consider comparing an estimated return on investment for jobs within their field of study against these student loan payments.
- Second, another way to integrate your children in this process depends on if you have money in an account earmarked and specifically designated for college, such as a 529 account or a trust. If this applicable, consider having quarterly investment review meetings with your children that examine these holdings during the college planning process. Reviewing this account with your child does not mean reviewing your other financial and investment accounts or disclosing your income– only focus on the account dedicated to paying for college. You can consider this exchange in the same way you might complete an investment review with your investment advisor on your retirement accounts – except in this case, as a parent you are serving in the role of the investment advisor. This review can detail particulars about asset allocation, risk tolerance, time horizon, and balance projections. The review and data, in concert with the estimated cost of the colleges under consideration, could possibly demonstrate funding gaps or funding surpluses and could even inspire the student to work harder in high school with an eye on merit aid. This pathway is a quality exercise that introduces your child to the critical concepts of saving and budgeting.
- Third, as you and your child progress within the college investigation process, a parent can stress to their children the importance of using a highly trained and disciplined consumer finance lens for significant purchases – especially as colleges across the country are closing or facing financial strain. I am not sure any parent or student would like to be in the middle of completing their degree at a college that closes mid-stream. Reviewing college enrollment trends and other time series data on graduation rates, endowment balances, and admissions yields may provide a snapshot of the viability of the institution. This exercise opens your child to active and practical application of empiricism and discernment for purchases that can be laden with emotion – a process that hopefully will continue as they encounter more and more independent choices that involve their money and resources and the need for thorough investigation before arriving at an informed decision.
- And fourth, the culminating moment – the timetable during the senior year of high school where the family is in receipt of the college admissions decisions and all the corresponding financial and merit aid award letters from the accepted colleges, is where the ultimate measure and opportunity of financial education culminates. More specifically, as you narrow the choices based on all your college selection criterion that may include price and scholarships offered as some of the parameters, consider coaching and allowing your child to complete discussions with the admissions or enrollment management team of the college that request to uncover additional merit aid than what was offered to date as a practical entry to the world of negotiation. This final decision, a moment where value, return on investment, along with academic and social fit all come into play is where the preparation, conversations, expectations, information, values, and resources mesh – an ultimate journey of financial decisions and contemplation that serves as one of the best possible case study experiences your child could embrace.
Oof – as if the college choice wasn’t already a loaded experience and I just added more layers to consider as you journey on this rollercoaster. I just shared with you four examples of how this life cycle event is certainly an opportunity to evoke introductions and conversations centered on financial education – and hopefully is preceded during your child’s life with other opportunities to discuss concepts of budgets, return on investment, asset allocation, time horizons, product viability, the art of negotiating, and so many other skills and depth needed to navigate the day-to-day management of money and resources – all of these parental efforts, though, amount to a slow drip of instruction that help children to grow and develop into well-engaged and motivated contributors to the world of work and charity.
Thank you again for joining us today. Please contact your Wilmington Trust advisor if you have any questions around using college planning to springboard financial conversations with your family, we would be glad to help. See you next time!
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