Why Your Education Planning Needs to Be around Your Child’s Ambitions
Education planning is a long process that can take many years to finish. Experts recommend that you should start saving for your child’s higher education costs from the moment they are born. This allows you to save optimally over the span of many years. This also removes financial anxiety, compromised dreams, and a stressful life in general. The longer the term, the more time there is for your money to grow in value, make use of the power of compounding, overcome any losses, etc. Starting early also helps you pick the right investment and savings instruments that can offer you the desired returns on your money. You can also consult with a professional financial advisor who can help you to invest wisely and build an education planning strategy to achieve this goal.
However, while most parents concentrate on starting to invest or save early, save aggressively and systematically, and seize all opportunities of financial aid, they sometimes tend to forget the fundamentals of education planning i.e. to align their education planning needs around their child’s ambitions. The current times are a lot different than what they were even a decade ago. Many alternative and offbeat career options have opened up for children that may or may not require a college education anymore. The traditional concept of education and success are changing drastically. Hence, when planning for the future education needs of your children, you must be in sync with your child’s goals and ambitions. Read on to know more.
Reasons why your education planning needs to be circled around your child’s ambitions
1. An education Planning Strategy based on every child being unique:
You must acknowledge the fact that every child is unique and different. Just like no two people look the same, they also do not share the same mind and interests. Your child may not look at life from the same lens as you do. Many a time, parents assume that their children will grow up to follow in their footsteps and join the family business. Generational businesses are generally passed on from one generation to another within the same family tree. However, your child may or may not want to be a part of a family-run company. This can in turn, also alter your education planning strategies. For instance, if your child wishes to join your company and requires a college degree to do so, you may have to start saving from an early age to be able to provide your child with the education they need. However, if your child rejects the idea of joining your business and wishes to pursue a career in sports instead, their education planning needs will shift from a business degree to professional sports coaching. This can bring in a different kind of cost for you to cater for. Hence, it is extremely vital for you to understand your child’s interests from a young age, so you can accordingly plan for their future. Saving aimlessly can be a futile attempt with no benefits in the end. On the other hand, systematic and goal-based planning in line with your child’s ambitions can help you save optimally.
2. The times are changing so understand your kid’s off-beat career ambition to plan for their education expenses:
Gone are the days when being a doctor, lawyer, actor, professor, chef, etc. were a select few professions most people chased after. The 21st century and especially the last decade has brought a wave of many new professions into the world. With social media and its increasing relevance in everyday lives, social media managers, influencers, make up artists, painters, You Tubers, ethical hackers, yoga experts, nutritionists, dieticians, trainers, personal stylists, motivational speakers, comedians, film reviewers, decorators, blog writers, Tik Tok stars, etc. have become sort after professions. These career paths do not always require a college degree or even a high school diploma and yet can be extremely rewarding financially. If your child seems to be interested in pursuing such a profession, you may not have to save as much for their education expenses. Surprisingly, many teenagers have already achieved great success on social media platforms like Instagram, Snapchat, Twitter, etc. and are also making money through them. It can be helpful for you to talk to your kid about these aspirations and be open to the possibility of your child pursuing such offbeat professions. Supporting them in their endeavors can help them get to their goals sooner. Moreover, if your child wishes to adopt such a career path, you can divert your savings to another goal, as the costs involved here would be a lot less. If your child is making money through social media and still wishes to study further, they can contribute to their education expenses themselves. This can reduce or fully eliminate your burden. Either way, try to be on board with their choice to follow a certain ambition and help them accordingly.
3. It helps to plan for education expenses efficiently by picking the right savings tools to benefit your child:
As stated in the previous point, it is crucial to understand your child and their capabilities as it can help you plan for their future more optimally. While being supportive provides your children with an emotional cushion to rely on, it also helps you in picking the right savings account or funds that can benefit not only your child but also aid your financial planning goals over the years. For instance, if your child is certain about attending college, a 529 education planning account can be a great savings instrument. A 529 education savings plan is an investment tool that allows parents to save for their children’s future education expenses. The account can be used to cover qualified educational expenses that include tuition fees, the cost of books, room rent, course-related equipment like laptops, etc. This tax-advantaged account is a state-sponsored plan and offers tax saving, the safety of returns, and structured growth on your money. However, unqualified withdrawals can attract a 10% penalty on the earnings. Hence, it is important to understand your child’s inclination towards attending college. If you feel that your child may not go to college, saving in a 529 plan can be a loss for you and result in a penalty. It may be advised to talk to your children every now and then to gauge their interest in getting a college education. It is also important to realistically analyze their caliber. If your child lacks the competence to get into college, saving meticulously in a 529 education account may be a lost cause.
4. Saving optimally in a 529 education account v/s an IRA account:
Some children are gifted with additional skills that can help them get scholarships to college. If your child excels in sports or has the capability to be the valedictorian of the school one day, you can expect some college scholarships to ease the process for you. Partial or complete scholarships can considerably help parents and students achieve their dreams. But getting a scholarship is a tricky business. You can never be sure of whether or not your child gets one, which makes it hard to depend on them. One thing that can help you here is to encourage your child to perform well in their field of interest to ensure they have a good shot at getting the scholarship. Motivation can greatly help students do better. Additionally, you can continue saving in an account other than the 529 education savings account. A lot of people use the Individual Retirement Account (IRA) as a backup savings fund for education expenses. If the scholarship money does not come through, the funds from an IRA can be used to pay for education costs. On the other hand, if the scholarship does come through, you can simply use the IRA for other qualified expenses, such as a home purchase, retirement, health expenditure, etc. But make sure that you discuss this option with a financial advisor as retirement planning and education planning are two crucial but separate components of your financial plan. Mixing the two should be done carefully and prudently.
5. It allows your child to pursue their dreams when you save for their future education needs:
Education is essential and can create a path full of opportunities for any individual, but it is not the end of the world. It may also not suit everyone. Hence, try to understand your child’s needs and goals in life outside of education. Some children may be artistically inclined, while others have a niche for numbers. However, no matter what they choose and how many times they change their mind, as parents, you must try to be supportive of their dreams. This can ensure that your children do well in their life and pick a profession they are entirely certain of and can excel at. For instance, your savings can help your child build a business, record music in a professional studio, pay for rent, and a lot more. Let your children decide how they wish to use the money for their career advancement rather than making these decisions for them.
To sum it up
As you spend years planning for your child’s future, make sure to account for the changing times too. Stay up to date with the latest career options and let your children make the most of these rising tides. This will ensure that your child lives their life to the fullest and your hard-earned savings are not wasted on unwanted dreams and ambitions.
If you need help in saving for your child’s future, you can get in touch with a financial advisor in your area to help you build a plan so that you can meet their future education needs.