Investing

Funding College: First-Generation Grad on Preparing Kids for Higher Education

Education changed my life.

While skipping class one day my freshman year in high school, I was fortunate enough to see a flyer in the hallway that read, “Historically Black College Tour.” I was immediately intrigued and wrote the phone number on the flyer. I couldn’t wait to get home and call to inquire about the tour. I was able to fundraise enough money from different family members and go.

I count my blessings for that opportunity because I was able to visit and then attend Tennessee State University. I also went on to earn master’s and doctoral degrees. But, if it weren’t for student loans, I wouldn’t have any degrees. Those loans provided a great return on investment because I was able to obtain great-paying jobs.

Passing Down the Lessons Learned

Now I am teaching my children the value of money and how to save for college. It is important to create their own income and start to think about how they will help pay for their college expenses. Like most parents, I’d prefer my child not go into debt to earn a degree.

I think it’s important that my children know that they are responsible for helping pay for their college education. Not because I can’t pay for it, but because I want them to appreciate the experience and learn the value of money. Therefore, I am teaching them financial literacy topics including entrepreneurship and investing.

Entrepreneurship

For example, I am teaching them to create their income. So far this year they have been running their lemonade and snack stand, writing books, creating artwork, and even knitting potholders. And they are doing a great job selling!

We do the accounting together and discuss their profits and losses. Then they are required to save and invest a portion of their proceeds. It’s never too early to teach them about investing for the future.

Investing

There are several popular accounts you can use to save for education expenses: Uniform Gift to Minors Act (UGMA), Uniform Transfer to Minors Act (UTMA), College 529, and Coverdell USA.

Currently, each of my sons has a UTMA account in their name. When I became a divorced single mom, I immediately set up UTMA accounts to save for college and other expenses for each of my children. UTMA and UGMA custodial accounts are another way to save for expenses like college but aren’t earmarked only for college expenses.

These accounts allow an adult to invest for the benefit of a child until he or she reaches the age of majority. UGMA accounts hold money and securities, and UTMA accounts can hold additional types of property.

We live in the state of Tennessee, which offers two years of free college education. Since I suspect my children will have low college expenses, I chose the UTMA. I also expect that they will receive scholarships and work or start a business while in college. The UTMA allows me to invest money for their use outside of just college.

There are also the very popular College 529 and Coverdell USA accounts that can help you save for your children’s education.

The College 529 is popular because it allows tax breaks. Some states allow contributions to be deducted from your tax liability. In addition, the earnings grow tax-free.

Read More: 529 Plan vs. Roth IRA: Which is Better for College Savings?

The Coverdell USA is a trust or custodial account used to save for education expenses but does have contribution limits.

The Bottom Line

Think about how your child can learn the financial skills now to help reduce the future cost of their higher education. It’s OK to let your children know that they have responsibility in their financial education.

I believe in establishing my own financial security so that I can support my kids in their own future goals. To visualize my progress, I use the Personal Capital Dashboard to see all my accounts in one place. I linked my accounts, and now I use the tools to track my budget, spending, investments, and net worth.

Read More: How I Used Personal Capital to Build Wealth as a Single Mom

The free tools also include an Education Planner, which allows you to visualize the financial impact of college on your own long-term retirement plans.

Get Free Tools for Managing Your Financial Life

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