Guest Post - Freshman Fund

Parents: Unlock the "Hidden Value" in Your Greatest Investment

As I watch friends move from their post-college years into early parenthood,
I have noticed a distinct trend. Whenever the topic college costs comes up
with almost-but-not-quite-yet parents, the response is generally "Hm, yes
well that is going to be expensive isn't it? But it's such a long ways off,
I'm sure it will sort itself out." Then, shortly after the birth of their
first child, the reality that college will very easily double whatever
they're going to spend in the next 18 years just getting the little tyke up
and out the door sinks in, and the refrain becomes "Well I can never save
enough, so why even try?" To paraphrase a certain 2007 Nobel Peace Prize
winner, a lot of people move directly from denial to despair, but I'd like
to briefly demonstrate why that is W-R-O-N-G.

There's nothing more valuable to you than your children,
they are your pride and joy, the hope of the future, and most likely your biggest single
expense. And it's for all of these reasons that you should save whatever you
can to help them pay for college.

Your Little Angels

Well, maybe not when they take the car out "just for a minute" and are MIA
for the next three-and-a-half hours, but otherwise they're pretty darn
special. And it goes without saying that you want them to be as happy,
healthy and secure in adulthood as they've been growing up. One of the best
ways to do all this is, surprise surprise, ensure they can go to college. An
average college grad has a lifetime earnings potential over $1 million
greater than someone who stops at high school. What does that mean?
It means college grads earn 57% more than high school grads on average, and
higher income means more options in both the present and the future. To give
just one example, setting 10% of that "college surplus" aside each year
would contribute as much as an extra half-million dollars towards their
retirement.

Freedom, The Sweetest Gift

Your children are the next generation. Again, no big revelation, but worth
considering in light of a burden facing the current generation of college
grads, unprecedented levels of student debt. As a reader of personal finance
blogs, I'm going to go out on a limb and assume you agree debt is a "bad
thing" and to be treated with caution, if at all. While the rising costs of
college mean there is no debt-free option for most of us, saving what we can
afford makes a significant difference because it reduces the debt. The
standard term on a student loan is ten years, so for every $1,000 you manage
to save, that's about $1,300 in debt you've liberated from a
government-subsidized loan, and for a private loan it's over $1,900. The
absence of that debt means freedom, freedom to explore more than one career,
stay in school for an advanced degree, or take a job based on more than just
a salary adequate to pay off your debt.

Show Them The Money

Raising financially responsible children in America is a tall order. My
parents spared no expense when it came to my education and imparted values
which have kept me from harming myself irreparably, but I am still holding a
lot more debt than I'd like. The sense of freedom for a new college student
can be exhilarating, but the thrill can often lead to risky behavior, and
one of the unfortunate outcomes can be a rapidly acquired boatload of
high-interest credit card debt. The good news for college savers is that you
have the perfect opportunity to involve your children in the financial
health of the family, and share a lesson in how planning and fiscal
discipline can maximize your advantages in good times, and protect you when
things get rough. So keep saving and save your statements, use them to show
your child why compound interest, not a Jedi Knight remains the most
powerful force in the universe.

Which reminds me :) one other great way to get your children involved is to
create a Freshman Fund account and show how the gift of college savings is helping your
family meet their college savings goals. However you do it, start saving for
college now, an investment in your child's future pays rich dividends now
and in the future.

Jonah Keegan is just weeks away from welcoming his own future college
freshman into the world. He founded Freshman Fund to help parents
save more for college with an online gift registry for their child's college fund.
If you'd like to learn more or you have any questions about college savings, he can be reached at jonah dot keegan at freshman fund dot com, or (347) 416-6498.