Things you can do RIGHT NOW to help your kids avoid college debt

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I’ll never forget my parents’ laughter after I asked them how much money they had put away from me in my college savings account. “Nothing.” They said. My jaw dropped and tears welled as I asked how I’d be able to go to college. “You’ll take out loans. Or get a scholarship,” they explained. 

Even though I attended a private University I was fortunate to avoid college debt. At least by the time I graduated. I picked a school that has subsidized tuition and my fees were significantly lower than most colleges. Fortunately, my husband and I were able to earn multiple scholarships, take out some small loans, and work to help fund our way through college. I think it taught us a lot. And we grew a lot through that process. 

Interracial couple at college graduation. How to avoid college debt.

Now we have three kids of our own we are thinking about what their future might look like. We don’t know if college the right path for each of our kids. My husband is adamant about them not going just for the sake of going but having a real purpose in getting a degree. I had it drilled in me that I would be going to college. Nevertheless, right now, we want to be prepared and help them save just in case. So they can hopefully avoid college debt. Between 529s, IRAs, savings accounts… There’s a lot to consider! Fortunately John Hancock financial advisors are so helpful when it comes to navigating these different options. And explaining them in a way that makes sense. Now we have new hopes and goals for our kids’ savings accounts. 

Our Plan to Help Our Kids Avoid College Debt

Interracial family of 5. How to avoid college debt.

529 Savings Plan

One thing I didn’t realize was that with a 529 college savings account, that funding can be used for all kinds of educational expenses. Such as books and materials along with tuition, and sometimes even room and board. Also, the account can be passed on to another beneficiary. So if your child doesn’t wind up going to college, or if they get a scholarship. You an even pass it on to your grandchildren!

If you wind up using the money for something else you only pay a penalty and taxes on the earnings that your savings generated through the years.

Biracial girl

Roth IRA Plan

A Roth IRA retirement account may seem like we’re getting ahead of ourselves, but I can’t stop thinking about what a huge head start we’d be giving them. I didn’t open my account until I was 29. They’ll have a 20-28 year head start on me!

The positive about a Roth IRA is the flexibility of what the money can be used for. College, retirement, a home. In order to contribute a child does need a form of earned income though so that can be restricting. But for our kids, since they’re employed by our family business it’s a possibility. The main downside we see right now with a Roth IRA is the idea of them having complete control over it when they turn 18. But hopefully with a lot of good financial discussions that won’t be a big deal.

We already have savings accounts for our two oldest. Our immediate goal is to start a third for Lee Lee this year. And open Roth IRA accounts for each of them. We also would like to start a 529. John Hancock’s website has a great 529 calculator. I found it helpful to set a target date and figure out contribution amounts and what they could grow become. 

Interracial couple at college graduation. How to avoid college debt.

My husband and I are trying to find a good balance between paying off our home, continuing to save for future expenses and our retirement. For now we feel like we can contribute some to their savings accounts. Because even just a little bit of help now could possibly make a big difference later on. I know it would have for us. 

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One Comment

  1. I can definitely relate to the sinking realization that my parents didn’t prepare for my college fund. I thought “this can’t be real, how are they not worried about this”. Thank you so much for this post. I’m a firm believer it’s never to early to start saving and your tips are super helpful.

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