With graduation season approaching, my family is another year closer to our next chapter. College is right around the corner for my son, Charlie, and daughter, Katelynn. As a father, it’s a roller coaster of emotions. As an Advisor, I know what I’m in for in terms of contributing to my kids’ education.
As our family approaches the college phase, my wife and I know that our financial plan will temporarily plateau. Paying for college, whether covering all or part of the costs, requires a shift in focus. Despite feeling like a setback, it isn’t; it’s part of the plan. The plans we build account for these pauses, giving us the flexibility to navigate the immediate costs while also making space for the emotions of this life stage. So, let’s explore the arc of saving and paying for college while enjoying it at the same time.
The Early Years
In your mid-20s to mid-30s, the focus shouldn’t be on saving large sums for things like college just yet. At this stage, you might have an idea of whether you want kids or not but worrying about this isn’t necessary. Instead, it’s about establishing solid financial habits for yourself because time is an investor’s best friend. You’re early in your career, possibly saving for a home and retirement. Keep an eye on the future, but don’t forget to enjoy this time.
Establishing Your Financial Foundation
Around your late 30s to early 40s, you’re more established in your career, may have made a down payment on a home and have a family. Suddenly, the idea of tuition bills no longer feels hypothetical. As your financial foundation strengthens, contributing to a 529 plan becomes part of the plan, and you get a sense of how college funding fits into your broader financial goals. Of course, this balances with other priorities: saving for retirement, managing mortgage payments and covering the costs of raising a family.
As college starts to feel more real, so do the numbers. In 2024, the average total cost of a four-year degree at an in-state public university was around $108,000. According to EducationData.org, this total cost includes tuition and fees, books and supplies and room and board for students living on campus. It doesn’t factor in transportation, daily living expenses, student loan interest or other additional costs.
For students attending college out of state, the average total cost exceeded $180,000. Private colleges push those numbers even higher with nonprofit institutions averaging over $226,000. Even two-year programs require a sizeable financial commitment. The charts below provides a full breakdown of these average total costs, underscoring the importance of having a plan in place. For many families, college represents one of the largest financial commitments they’ll take on for their children.
| Average Total Cost of Public College | ||
|---|---|---|
| Institution Type | Total Cost of Tuition | Total Cost of Degree |
| 4-Year In State | $39,000 | $108,584 |
| 4-Year Out-of- State | $113,544 | $182,832 |
| 2-Year In-State | $7,196 | $34,878 |
| Average Total Cost of Private College | ||
|---|---|---|
| Institution Type | Total Cost of Tuition | Total Cost of Degree |
| 4-Year Nonprofit | $153,684 | $226,512 |
| 4-Year For-profit | $63,472 | $134,296 |
| 2-Year In-State | $32,888 | $53,280 |
Toward the end of this stage, you should begin thinking about factors like financial aid eligibility, tax benefits and cash flow timing. The numbers might be daunting, but having a plan means trying to reduce the sticker shock when the time comes. Even if you aren’t covering every dollar, starting early and having thoughtful foresight can help bring clarity and limit stress.
The College Payment Crunch
At this stage, college is a near-term line item in the financial plan. The years of contributing to a 529 or other savings accounts have built a foundation, but now it’s time to start making real decisions about how to use those funds, what gaps exist and how they’re going to be filled.
This is where the balancing act gets trickier. You may need to temporarily scale back retirement contributions, adjust spending and determine how much of the college costs your kids will cover. None of this is easy, and emotions are running high. Remember, you have a plan and a team at TCI to support you.
In this phase, for the first time, financial planning shifts from accumulation to decumulation. Many people have a hard time with this transition. It’s no longer about how much you’ve saved but about deploying those savings effectively without derailing your financial plan.
The priorities of each decade shift and while this stretch might be challenging, it’s important to remember that this won’t last forever. The years of careful planning have set you up to navigate this phase. Before long, the focus will shift again.
Catching Up and Maximizing Savings
In your 50s and beyond, college expenses will be behind you and the house should be nearly paid off, so it’s time to focus on catching up on your own savings goals. This is the “catch-up” phase, when you can max out your savings for retirement. Higher contribution limits for retirement accounts like 401(k)s and IRAs exist so you can rebuild and strengthen your financial position before stepping into retirement.
If you still have unused 529 dollars, this is the time to decide how to repurpose those funds. With recent rule changes, the leftover 529 money can now be rolled into a Roth IRA for the 529 beneficiary subject to certain limits. That will give them a head start on their own retirement savings. Alternatively, funds can be saved for future educational expenses, transferred to another family member or even used for your own continued learning if that fits into your next chapter.
Communicating Throughout the Process
When it comes to planning for college, clear and open communication is a key component to the college arc. The conversations can’t solely be about the numbers either. Parents need to be aligned on their financial plan, how much they’ll contribute, if help from grandparents is available, whether loans are an option and what role, if any, their child will play in covering costs.
At the same time, kids must be honest about what they want from their college experience. For example, Charlie likely won’t choose a school without access to mountain biking trails. It’s a core part of his life and community. Katelynn, on the other hand, has her sights set on studying dance and wants to be near world-class performing arts. Knowing this now shapes the conversations and informs our search for schools. It ensures our kids’ college experiences align with both their passions and our financial realities.
Enjoying the Experience
Try to enjoy this time. It’s one of the last big adventures you’ll share before your kids set out on their own. This is where the college experience begins. Visit big schools, small schools, urban campuses, and rural ones or whatever is realistic for your family. If there’s a dream school with a hefty price tag, explore it. Don’t rule anything out until you see the numbers, because you might be surprised at what’s possible.
While the focus is education, this is also a chance to connect as they transition to young adulthood. Talk about their dreams, goals and the life they’re envisioning. College is more than academics; it’s a pivotal step in shaping who they’ll become. Helping them find the right path is part of the experience, one I know I’ll cherish in the months ahead.
The point of a long-term financial plan is to help you navigate life’s big transitions with confidence. Yes, the college transition will bring emotions and some stress. Our plan will plateau for a time, but that’s part of the process. It’s a major shift, but one our family is preparing for. Now, it’s time to lean in, be present, and enjoy the arc of life.
