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My 529 is being hit – what can I do and how do I talk to my student about it all?

Mar 24, 2020

We encourage financial literacy in young adults and there’s no better time to talk about money than right now, when markets are in turmoil and your 529 may be at risk. This article will give you tips on how to use and manage your plan so that risk and impact is minimized.

Aside from the 529, let’s talk about how you can use this situation as a teaching moment, an opportunity to give your student tools and knowledge to eventually fly the nest, leave home, and become financially independent: the greatest gift you can give them.

College will be one of the biggest investments you and they will make, and will have a significant impact on their future income and happiness. Too many times we see 20-somethings struggling to manage budgets, make informed decisions about careers, manage credit and obtain comfortable living situations because they don’t have a clue about money.

Because you’re a parent, you may think that giving your student the “gift of college” is the nicest, most generous thing you can do for them, and after all, you’ve probably been thinking about it and preparing for it for a long time. This doesn’t mean, however, that you shouldn’t talk to your children about college costs or expect them to contribute. In fact, it’s to their advantage to have some skin in the game. They will appreciate their education much more and will take it more seriously if they know they’re paying for it, too. And most importantly, they will feel more motivated to search for a career and job because they will have some loans to start paying back. The loans don’t have to be large, and you can have a tacit understanding that you will help them pay the loans after college if they’re struggling to find a job. You may want them to move home after graduation, but the sooner they spread their wings and jump out of the nest, the sooner they will feel empowered and in control of their own lives.

When to start “the talk”
Start talking about college costs when your students are starting to think about college – for most, that might be at the beginning of high school. Before they start thinking about their “dream school,” they need to know that college is very expensive, especially if they are not submitting a strong application. Grants, scholarships, and loans can bring some colleges within reach, but only if you plan early, and get them involved in the planning.

Preparing to manage the cost of college
It’s important to strike the balance between encouraging your children to follow their dreams and being realistic about costs. There are many ways to make schools more affordable, if the student starts early enough.

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