College Bound: Steering Clear of the Most Common Financial Planning Mistakes
As a CERTIFIED FINANCIAL PLANNER™ professional, I've made a career out of assisting folks with their most crucial financial planning needs. Today, let's chat about one of the most exciting (and daunting) financial adventures many parents encounter: sending a child off to college.
If you've recently waved your child off to college or have a graduate who's on their way, this article is for you. We'll delve into some of the most common mistakes in college financial planning and how to avoid them, ensuring your family is on the right path toward financial security.
Common Mistake #1: Leaving Legal Matters Unaddressed
First, don't overlook the legal stuff. It's easy to forget about documents like the HIPAA Release Form and Healthcare Proxy amidst the excitement of college preparations. These documents grant you access to your child's medical records and allow you to make medical decisions on their behalf. If you haven't already, consult an attorney to ensure you have all necessary legal documents in place.
Common Mistake #2: Disregarding Insurance Needs
It's also critical to evaluate your insurance policies. From homeowner's insurance covering your child's belongings at college to health and car insurance needs, it's important to review and adjust these policies as necessary. Overlooking these could lead to unexpected expenses or inadequate coverage.
Common Mistake #3: Procrastinating Medical and Dental Appointments
Avoid delaying essential medical and dental appointments. Particularly for children with chronic medical conditions, it's crucial to ensure that all health needs are met before they leave for college. Also, be sure to obtain medical records and ensure vaccinations are up-to-date in compliance with college requirements.
Common Mistake #4: Skipping the Budgeting Process
A common misstep is not establishing a budget for college expenses. It can be tempting to hand over a credit card to your teenager and hope for the best, but this can lead to overspending. Take the time to sit down with your child, discuss a budget, and educate them about responsible money management.
Common Mistake #5: Missing Out on FAFSA Opportunities
The FAFSA form is your gateway to scholarships, grants, and other financial aid. Not submitting it promptly can cost your family valuable opportunities. Make sure to review and submit the FAFSA form to maximize your child's eligibility for financial assistance.
Common Mistake #6: Overlooking Credit Building and Financial Literacy
Establishing credit and promoting financial literacy is a fundamental step towards your child's long-term financial success. Consider helping them open a credit card in their name, teaching them responsible credit habits, and introducing personal finance fundamentals.
Common Mistake #7: Not Adding the Child as an Authorized User
Adding your child as an authorized user on a credit card can help them establish a credit history and provide a safety net for emergencies. Missing this opportunity might hinder their credit-building efforts.
Common Mistake #8: Ignoring College Funding and Loan Options
Lastly, don't overlook the array of college funding programs and loan options available. Depending solely on one source of funding, or not researching options thoroughly, can result in missed opportunities for financial assistance.
For our mothers who are also heads of households or who don’t have a partner, your role in this financial planning process may seem even more daunting. But remember, the considerations we’ve talked about apply to all families. Don't hesitate to seek advice or support when you need it - being proactive in your financial planning now will pay dividends in the long run.
The journey of sending a child to college can be an exciting, yet challenging, milestone for parents. By avoiding common financial planning mistakes, you not only secure your child's educational journey but also lay a strong foundation for their future financial health. Remember, these considerations are not just about numbers and paperwork; they represent your family values, your child's dreams, and your commitment to securing a promising future for them.
As a CFP®, my passion is helping families navigate these waters smoothly. Financial planning for all members of your family is something I can help with, so don't hesitate to reach out if you're feeling overwhelmed. College is a significant step in your child's journey, and with careful financial planning, you can ensure it's a step that leads them towards a secure and prosperous future.
- Lauren Smith, CFP®
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