Saving for your children’s education is undoubtedly the most problematic and challenging of the life cycle events presented.  This is an event of choice while the other Life Cycle Events, retirement for example, are going to happen without choice.  Most individuals have about forty years to plan for their retirement although most do not start until much later.  The time frame for education savings is never more than eighteen years (if you start at a child’s birth) and usually less than ten.  And, finally, you may often find yourself saving for more than one child.


Your first consideration is if you think it necessary to fund their education at all or whether you chose a pay-as-you-go plan with student income and student loans.   Should you chose to pay for their education, you must determine the future total, inflation adjusted, cost of tuition; the present value of that future cost using an inflation adjusted interest rate, and the annual payments needed to fund that cost.  Of course, you are then faced with a multitude of saving options to maximize your after tax savings and determine your degree of control over the investments.  This is often the time in life when a previously "stay at home parent" finds it necessary to enter the work place to supplement family income.  Suffice it to say that even the savviest of planners can benefit from professional financial help to create an achievable plan.

When planning to fund your children's education, consider the following:

  • It is never to early to start this plan
  • Determine what level of responsibility you choose to assume
  • Investigate 529 savings plans, Cloverdale plans and all other savings plans
  • Pursue every student grant, scholarship and all financial aid available
  • Look at Stafford and other subsidized loans
  • Never put your family in long term debt to fund your children's education
  • Parental student loans must be paid off in 10 years or before retirement
  • Student loan debt must not exceed on year salary after graduation
  • Make student loans the responsibility of the student
  • Consider having the student attend two years of "live at home" junior college followed by two years of state university

Life Cycle Financial Planning