Preparing for the costs of what comes after high school can start at any point in your child’s life. Use this financial guide to help with what you need to know (and when you need to talk to your kids, too).
Helping your kid launch financially into college or another training program post-high school takes time (and lots of conversations).
This financial guide for college (or really any learning path) offers ways for you to help make saving and spending strategies that balance everything from your budget to your kid’s goals. You can also use parts of it to jumpstart conversations if your child is entering the workforce right away, too.
Of course, the financial planning and prep you do with your kids doesn’t start in high school, but well beforehand. “It’s like trying to teach any other life skill,” says Heather Winston, a financial professional and head of product strategy for Individual Solutions at Principal®. “Break the lessons up over time, repeat them, and build on them.”
While we’ve offered some general timing tips, detours happen. Do what you can, when you can. Here’s how to get started.
If you think you want to save for an educational path for your child, there are a couple of different ways to start.
Probably the best known is a 529 college savings program. These are offered by many states and some provide state tax breaks, too. Other options include pre-paid tuition programs, Coverdell Education Savings Accounts (ESA), or a custodial Roth IRA.
But not every young adult pursues education after high school: Nearly 40% decide to work.
Know that whatever the goal, you can start saving at any point in your child’s life. Many families ebb and flow how much they put away depending on other needs and goals. Or, set a single goal and see if you can achieve it. For example, the average 529 plan balance is $30,295,
The earlier you kickstart financial lessons with your kids the better—you don’t have to wait until they’re a high school graduate or college bound. “Teaching your children about the value of money is a skill they’ll have for their whole lives,” Winston says.
Start with whatever tools fit into your money philosophy, from paying for chores to saving birthday gifts. By the time your child is in high school, you can dive into the “hard” costs. For college, those include tuition and room and board; “soft” costs are activity fees, tickets, and dining out. For working graduates, “hard” costs may be rent, utilities, and food, while “soft” are entertainment, among other things.
There are all kinds of scholarships for all kinds of students. Some are renewable, while others require a certain GPA or number of credit hours. And not all are for 4.0 students. Dig around locally and nationally, and you may find aid for a particular field or trade, first-generation students, kids of union members or veterans, state students with high test scores, or those with a family member affected by cancer.
Many accredited programs offer some sort of financial aid, and states often award vocational-technical grants, too. Your high school guidance department may have resources, or search your state’s name and “aid for technical/trade programs” to get started.
Training and apprenticeship programs, community college, and four-year degrees: They all have a cost. Wherever your child’s interests land, the last two years of high school are time to compare costs. Any school that participates in federal student aid programs is required to provide information about its cost of attendance and offer an NPC on its website. (The NPC for some schools even estimates potential merit scholarships.)
Whether or not you’ll qualify for federal aid, fill out a Free Application for Federal Student Aid, or FAFSA. The sooner the better; it’s what you need to get your expected family contribution (EFC). And some scholarships require it. (Good news: Retirement assets aren’t counted in the formula on FAFSA.)
The CSS Profile is used by a smaller number of schools, most of them private, and it takes additional information into consideration. Generally, colleges that require you to file a CSS Profile are hard to get into and have a high cost of attendance but can also be generous with financial aid.
To learn more, visit the College Board (for the CSS Profile). You can also watch a video that explains types of federal student aid to better understand options.
For college- or trade-school bound kids, a comparison can help narrow potential choices. Review:
- Tuition and room/board, including cost increases while they’re in school
- Additional tuition/fees for your student’s area of study
- Costs to travel home for weekends or breaks
- Jobs on or near campus and local internships
- Credit (and tuition saved) for Advanced Placement or dual enrollment courses at a community college
- Four-year degree completion date (if applicable)
- Advanced degree needs and costs (if applicable)
- The college cost versus the total cost of the degree (if applicable)
Many families consider loans to pay for some or all of college. These details are important:
- Repayment estimator looking at monthly costs over the life of the loan
- Interest rates and fees
- Federal vs. private student loans
- Subsidized vs. unsubsidized federal student loans
- Parent PLUS loans
For working graduates, help them create a starting budget and focus on a job search. This budget worksheet can help you get started.
EFC is just a number used by a school to calculate your kid’s eligibility for institutional, state, and federal student aid (loans, work study, grants), and what the amount may be, if any. It can change from year to year and is determined by a formula that considers your taxed and untaxed income, assets, and benefits (such as unemployment or Social Security). The size of your family and the number of family members who will attend college during the year are also factors.
Financial award letters generally arrive by April 1 and they are not standard from school to school. The College Board tool can help sort it out, and if you feel the award is in error, you can appeal to the school for help.
If you become too sick or have an accident that prevents you from working, adequate disability insurance can help you continue to pay college expenses. Life insurance can help your children complete an education or maintain an apartment if something unforeseen should happen to you. If you have permanent life insurance that has cash value, you may be able to take a loan against the policy to cover college costs, or even withdraw funds.
No matter your financial circumstances, preparing for when your child launches into their next steps can feel overwhelming. The better you can plan ahead, together, the more confidence you and your child can both have with next steps.
What’s next?
Juggling multiple financial goals can be hard, but saving for college doesn’t mean you should stop saving for your own retirement, too. Log in to principal.com to check your savings rate. Don’t have an employer-sponsored retirement account or want to save even more? We can help you set up your retirement savings with an individual retirement account (IRA).
