by Michael Evans, Founder & Wealth Manager
As much as we parents would love to keep our children wrapped in a cozy cocoon until their late 30s, we also couldn’t be more excited for them when they are barely 17, and already planning for life after high school. If their plans include college, the pride—and trepidation—only expands.
Searching for the right college experience is hard enough. The stakes are even higher given the mind-blowing costs of higher education; the cut-throat competition for admission; and perhaps most of all, the reality that you’re entering into this adventure with an 18-year-old, just barely an adult. Even if your offspring is the most well-adjusted individual you know, let’s face it: their brain is not yet fully developed. They crave independence, but require boundaries. They’re breathtakingly bold, and heartbreakingly vulnerable. You long to keep them safe and warm, even as you know it’s time to nudge them out of the nest.
Personal Financial Planning for College-Bound Kids
Each family’s journey is unique, with no single path to success. I can’t speak for everyone, but I can share what has worked well for me and my family. Back in 2018, we were deep into exploring the costs involved in sending all three of our children to college. At the time, I published a three-part blog series on the subject. Part 1 covered how to talk through this monumental family decision with one another. Part 2 focused more on the financial planning part. Part 3 takes a pragmatic view on paying for college.
In our case, my wife and I still wanted to provide as much as we reasonably could to help our kids achieve a higher education and a bright future. However, we couldn’t afford—and frankly didn’t want—to simply write blank checks from the Bank of Mom and Dad, no questions asked.
We decided we would benefit from being well-organized throughout the process, keeping track of all the ideas and information as each new piece arrived. For that, we created a spreadsheet. You can view a sample of that here.
In addition, as a financial advisor and high-charging entrepreneur, I wouldn’t dream of entering into any other financial commitment so significant—say, a car, a condo, or a cruise—without negotiating the particulars with all parties involved, and spelling out the terms in a legal contract.
So, I thought, why not do the same with our college-bound kids? After all, funding your child’s future through education is a huge investment. Where else would you allocate upwards of a quarter million dollars, and not have some form of agreement in place, addressing who does what, for how long, with protections in place if any of the parties don’t live up to their word?
A College-Bound Contract: The Parents’ Perspective
From these early conversations, and based on a sample I received from a colleague, the Evans Family College Contract was born.
Let us know if you’d like to see what our contract looked like. My wife and I liked the idea of a contract that established responsibilities for us, and our college-bound kids. Our version included:
- Relatively detailed academic, personal, and financial commitments for the student
- Emotional and financial support commitments for the parents
- Additional terms covering the financial consequences if the student failed to achieve a minimum GPA, or engaged in legal or illegal alcohol or substance abuse
We also included language from the SADD (Students Against Destructive Decisions) Contract for Life:
“I recognize that I will be faced with many difficult decisions. Throughout my college experience I may encounter issues such as alcohol and other drug use, HIV/AIDS, risky sexual behaviors, date rape, impaired driving, abusive relationships, and many more challenges. By signing below, I have entered into a contract in which I agree that I will always attempt to choose the best option that considers my own well-being, health, and safety. In addition, I will help friends whom I see making destructive decisions find any assistance they need. When I find myself in a situation that makes me uncomfortable or that I feel unequipped to handle, I will discuss it with someone I trust.”
We figured, even if things didn’t go exactly as planned, having the contract in place might ward off some the most dangerous behaviors. Maybe.
We created a template version, which we discussed with each child before they left for college. We took our time with these discussions, opening up to our kids and each other, so all parties felt heard. We also amended each contract to fit particular circumstances. We even added a few of our children’s own requests.
A College-Bound Contract: The Daughter’s Perspective
But how did it really go? For that, we need to hear from the next generation. My oldest daughter graduated a few years ago. She is debt-free, and busy in a promising career she seems to love.
Could we be prouder parents? I think not! Did our approach work? We asked our oldest, and here is what she wrote:
“I have an immense amount of gratitude for the 529 plan you set up and funded for me when I was younger. By having mom and you pay for school in addition to my scholarships, I was able to focus on my classes, making friends, and getting to know a new city. I was able to work part time during school to save for a goal (such as spending money for study abroad) without the pressure of having to work to pay for school. Not having to pay for school as I went through was truly a great benefit.
The plan was never to get bad grades, a tattoo, pregnant, or end up in trouble for alcohol consumption or drug possession. And thankfully, none of those happened. But I still felt having these and other terms spelled out in our contract held me accountable during my years studying in the U.S. and abroad.
Having already discussed and understood the finances for going to college also set the groundwork to discuss other things with you since I knew you both supported me and were living up to your side of the agreement too. When we had the conversation where you proposed and encouraged me to add another major, I had already hit the expectations of the contract (and my own expectations for myself) so it was easier to take on the additional challenge. It was a good conversation to have and double majoring pushed me and set myself up for future success.”
Not Every Reward Is Financial
If you’re a parent, can you just imagine how many tissues you’d need to dry your eyes after this sort of affirmation from your son or daughter? Especially with current supply chain shortages, there just aren’t enough Kleenex® boxes in the world.
Incidentally, regarding my daughter’s closing comments, we ended up bribing her to double major in finance on top of her marketing degree at the end of her senior year. No matter where life takes her, it seemed like it would be a great combination for her. She worked super hard to accomplish it, even as many of her fellow students were able to coast into graduation. To offset her extra efforts, we paid for her first few months of rent after school, so she had more time to relax a little, and interview for jobs after her heavy workload of classes.
Planning and Conversations Lead the Way
As I mentioned above, there is no one right way to go about preparing yourself and your children for their college years, and beyond. But if there’s a common theme, I think it has to do with holding life planning conversations early on, and increasing their depth and breadth as your children approach adulthood. You express your expectations. But you’ll also want to truly hear theirs, so you become familiar with each other’s perspectives.
There also are so many practical planning matters to consider, such as how to:
- Find and fund the right college, as I wrote about in a three-part “College Funding Factors” series.
- Establish relevant estate planning documents, and financial and healthcare powers of attorney, BEFORE they leave home, as I wrote about in “Sending Students to College: Insurance and Other Important Issues.”
- How, or if, to take on student loans or other college debt, as explored in this helpful SavingforCollege.com piece: “Are Student Loans Good or Bad Debt?”
How Cogent Strategic Wealth Can Help
What are your questions, thoughts and ideas about your own family’s college planning activities? How do you feel about student loans? For more than a decade, Cogent has been advising successful professionals, high-achieving entrepreneurs, and similar highly motivated individuals and their families on how to incorporate college costs into their financial plans. Let us assist you in better understanding where you are at, what may stand in the way of your getting there, and how to leverage an evidence-based investment portfolio to convert your well-laid plans into decisive action.
Whether your family’s college costs are imminent or years away, there’s never a bad time to start preparing for the rest of your life. At Cogent Strategic Wealth, we offer a fresh approach to helping you Design | Build | Protect Life on Your Terms. What would your best evidence-based investment portfolio look like and where would college savings fit in? To find out, sit down with us today for a Cogent Conversation. We’ll listen to what success looks like for you, explore any challenges your family faces, suggest a portfolio tailored to you, and help you build and manage it every step of the way.
The opinions expressed by featured authors are their own and may not accurately reflect those of Cogent Strategic Wealth®. This article is for general information only and is not intended to serve as specific financial, accounting or tax advice. By clicking on any of the links above, you acknowledge that they are solely for your convenience, and do not necessarily imply any affiliations, sponsorships, endorsements or representations whatsoever by us regarding third-party Web sites. We are not responsible for the content, availability or privacy policies of these sites, and shall not be responsible or liable for any information, opinions, advice, products or services available on or through them.
© 2022, Cogent Strategic Wealth®