Practical Advice for College Bound
College acceptances and scholarship applications are behind you, but as a parent or student you may find yourself asking, “Now what?” It can be overwhelming to figure out the next steps in preparing to start college. Over the next few months, you may be navigating housing arrangements, meal plans, and tuition bills just to name a few. There is little practical advice out there, often found only with a friend who has lived through the experience. Let me befriend you, sharing a few practical tips for both parents and students to consider ahead of the fall semester.
Parents
If you are a parent, you have likely saved up for many years to help your child pursue higher education. The time is finally here, so how do you pay? If a 529 education savings plan is an available resource, you will need to determine the amount of your student’s qualified education expenses. Withdrawals for such qualified expenses are federal income tax and penalty free. Qualified education expenses can include tuition and fees, books, supplies, and room and board to a certain extent, to name a few. Reserve non-qualified expenses such as transportation, sports passes, and extracurricular activities to be paid from non-qualified savings accounts or cash flow. Avoid withdrawing too much, too soon from a 529 plan, considering first the student’s scholarship awards, tax credits, and other tuition assistance. Withdrawals can be initiated online or by phone for distributions via check, bank transfer, or directly to the institution. Do not wait until the last minute, as bank instructions must be set up for at least a few weeks prior to a withdrawal request, and processing times can be slow. It is important to keep good records of expenses, as 529 withdrawals above any qualified education expenses for the year will need to be reported to the IRS.
Students
As a student, it is crucial to start this new chapter of life with a solid financial foundation. Be intentional about sitting down and creating a plan of action for your cash flow. Communication with your parents and/or providers is key. Other than tuition, how will you be paying for your day-to-day living expenses? Openly discuss expectations to determine what your providers plan to pay for compared to what you must cover. Will funds be obtained monthly, or on an as-needed basis? Will you need to work while in school to generate income for miscellaneous expenses or “fun money”? By asking these questions, you can have a basic plan in place and lessen stress from both parties down the road.
College is also a great time to start good financial habits. Start saving small amounts each month for emergencies and future purchases such as a home or car post-college. Open a student credit card with no annual fee and pay it off in full each month to begin building good credit.
Finally, I recommend all students take a money education or financial literacy course. Many colleges are beginning to offer something like this as an elective, even if you are not a business major. Regardless of your future career path, learning basic financial principles will pay dividends indefinitely in your personal and professional life.
Whether you are a parent or student, I wish you the best as you embark on this new endeavor! Reach out to your CPA and CERTIFIED FINANCIAL PLANNER® professional who will help guide you in executing your education plan and make the process less overwhelming.
Published in the Victoria Advocate.
Sarah D. Nix is a CFP® professional and Associate Advisor with Keller Wealth Advisors.
