Most parents may not realize that when it comes to saving for college, you have multiple college saving options available to you and your family. But whether you are the parents of multiples (twins, trips, quads, etc.) or have multiple kids, how do you determine what the best college savings plan option is best for you?
First, let us begin with identifying what the five college saving plan options are:
Full disclosure, my wife and I have a set of triplets and a younger daughter as well and set up individual 529 plans for them when they were born. When it comes down to it, here are the reasons why I believe that a conventional 529 plan is the best option for most families to save for college:
For an in-depth summary of all five college saving plan options, I created a side by side comparison here
Parents often ask me what the impact on financial aid would be in utilizing a conventional 529 plan. Unfortunately, most parents believe that it will negatively impact them, which is wrong.
If the parent is the account owner, accounts are treated as assets of the parent, which has a smaller impact on federal financial aid than if the assets were those of the child. The current federal financial aid formula considers no more than 5.6 percent of parents’ assets and 20 percent of a child’s assets available to pay for college.
Individual institutions may consider parents’ assets differently when deciding how to distribute financial aid. Be sure to consult the college or university financial aid office and your wealth advisor about your situation.
Practically, any type of saving for college could impact your federal financial aid; it should not deter you from deciding to save and invest. Another point that parents of multiples or multiple children should consider is that the more kids you have in college at one time, the lower your Expected Family Contribution (EFC). The more kids you have in college at any point in time is one of the most significant impacts on your federal financial aid.
Having conversations with your spouse/partner about how much you can or what to save should be your next step. I work with many families where one spouse/partner wants to pay the entire cost of college while the other does not. I help people find common ground on this issue while taking into consideration the other multiple financial priorities that are likely tugging at you.
If you have kids who are already in middle school or even high school, start having conversations about college with them now! Setting expectations with your kids as early as possible about how college costs will be covered or shared is vital. I can’t emphasize this enough. The last thing that you want is for your kid to get into an Ivy League school only to determine that you can’t afford to pay for it.
If you have questions about college planning or any wealth planning topic, including portfolio management and tax planning, schedule a time below to see how I may be able to help you prepare for college as well as other financial and lifestyle goals.