The following article is written by our partner in personal finance, Adam Carroll.

Should You Tell Your Kids How Much is Saved for College?

According to a survey done by Wakefield Research for Thrivent Financial, the majority of college students surveyed (70%) wished they’d talked to their parents more about college costs and funding. 

To be very candid, this is part of the problem in society today -- young people are sheltered from basic financial information that is exceptionally important for them to know when making educated decisions. If there’s $100,000 in the account, it creates vastly different choices and opportunities than if there is $10,000 in the account. 

What the Wakefield Research didn’t share was how open the students would be to receiving the information shared by their parents about how much was saved or how college would be paid for.

Shared ownership requires three things

There needs to be shared ownership in the decision of which college to attend, how much money to borrow, and what life will be like after college. Through my experience, I’ve learned that shared ownership requires these three things:

  1. Information. The Information part of the equation, as it relates to making a decision around college, would include:
    • How much has been saved in a 529 Plan or other vehicle
    • How much parents will be contributing to the college costs (if any)
    • How much responsibility the student/borrower has when it comes time to make tuition payments or student loan payments How much each school costs per year between tuition, room & board, books, and fees
  2. Decision Making. Armed with that kind of information, it’s time to start the Decision Making process. Some things you and your child might need to decide are: which school your child should attend, whether or not your child should take a year off to save money or travel, where your child should live to save money, how much your child is comfortable borrowing to attend the school of their choice, and whether or not you are willing to help out with month-to-month expenses, etc. As you might imagine, the decision making process looks radically different when the information is presented upfront, and your child is equipped to have these conversations. 
  3. Consequences. And finally, for there to be shared ownership of these decisions, the key is to understand the Consequences of each decision. A young person that fundamentally understands how much more they’ll need to borrow to attend a private school versus a state university, AND what the ensuing lifestyle differences will be, may make a more educated decision. Most importantly, because they had information, had the decision making power, and knew the consequences, they’ll feel a true sense of ownership of their situation after college graduation. 

What I see quite often is a student who desperately wanted to attend a certain school, so their parents did everything they could to make it happen. With no information upfront about costs or how much was saved, the parents helped their student take out massive loans (on which the parents usually co-sign), and after graduation all parties are somewhat taken aback at the payments that are due and how to make it all work. Without shared ownership, this can lead to blame, resentment, guilt, embarrassment, stress, and a whole host of other challenges. 

What to share and how to share it

In answer to the first question about whether or not you should tell your child how much has been saved, the answer is yes… but this conversation needs to be approached strategically.

What I’d recommend you avoid as a parent is sharing a blanket number, as in “we have $50,000 saved for your college expenses.” To the uninitiated soon-to-be high school graduate, you might as well tell them you have unlimited funds for college. With no context to the number, they may perceive that it is enough to cover all of their college costs and then some. 

What I DO recommend sharing is specific information about how much is available each year. For example, you might say to your student, “You’ll have $12,500 per year towards schooling from us. At a state university, that’s about half of what you’ll need each year, the rest will come from scholarships, grants, and loans.”

If there is a set number of, let’s say $20,000, it’s perfectly in line to say, “we have enough saved for one year of a state school, one semester of a private college, or two years at a community college. How you choose to use that money is your choice, but we need to talk about the consequences of each decision.”

Lastly, I recommend being very specific about yearly amounts instead of one large figure. This will help to provide your student context. This way, your student might be more motivated to apply for scholarships. More information on scholarships and grants is available here

Get help if you need it

Choosing a college and understanding college funding is a HUGE deal. It’s a life-altering decision that will tilt your life towards opportunity or challenge no matter how you approach it. So, if you or your child struggle with understanding the options or how to pay, please get in touch with the Financial Aid office at your local school to talk to an advisor. 

Just remember, Information, Decision Making, and Consequences make the rest of your life infinitely easier! For more info, check out the Thrivent Student Resources Tools and Resources page.

Adam Carroll

Personal Finance Expert and Author