The True Cost of College

We live in a culture that values education, which is a beautiful thing. This leads to many young couples and families facing the decision: Do we start saving for our child’s college? And if so, how soon?

It’s a question with great love behind it, because that’s what parents do: provide opportunities for their children to thrive. And so, it begs the question: with ever-increasing college costs, how can families possibly save enough? Thankfully, we have a calculator for that — and it’ll show you what most other financial advisors can’t or won’t: the opportunity cost. 

Meet the Education Calculator

The Education Calculator from Truth Concepts is truly something special because itgoes above and beyond your normal calculations. It can show you if your current trajectory is on track, it can account for inflation, and it can even tell you how paying for school can impact your future retirement funds. 

As you can see in the image below, someone with two children, ages 10 and 8, will have a cumulative college cost of $362,921. 

Remember, college costs are rising, and they will continue to rise. All it takes is a glimpse into past tuition data to see that this is true. The Education Calculator allows us to input inflation information to predict future costs. So what looks like a $30,000 tuition now will actually be much greater by the time this family’s children start college.

Based on what the parents are saving right now, it’s not going to cut it. However, we haven’t included any earnings rate or cost-of-living increase. When we do that, you might think that there’s plenty of money! There’s even $10,000 or so leftover, based on the left-hand column. But in reality, when you have to withdraw from the account each year to pay tuition costs, the account has to play major catch-up. (This is what the right-hand column in red shows.)

In order to cover college costs, as shown in the yellow text above the chart,  the parents of this family would have to save $19,390 per year, increased by 2% each year. That’s no small amount of money. And just to prove it, let’s input that savings amount into the calculator. As you can see below, all college costs are covered, and there’s a little bit left over. YET, the asset is still far reduced from what it could have been with NO education costs.

Solving the College Cost Problem

So what are we saying, exactly? Well, we’re not trying to discourage anyone from college. What we DO want to do is encourage families to start thinking about the future early and often. And yes, this means involving your children.

Their futures start with you and what you teach them. Responsibility, integrity, and financial competency–these are all traits that can be developed and are critical to the conversation. Of course, what’s appropriate will vary by age, but you must involve your kids in their future. 

For example, students who excel in academics, sports, and clubs might find that there are many more scholarship opportunities available to them. If you have a young entrepreneur, helping them grow their business could be a new pathway to financing school. 

You’ll even see that in the Education Calculator, there are fields to input other financing options to reduce the financial burden of college on the parents. 

Of course, parents want their children to succeed, and yet when you can only set aside so much money a year, it can be difficult to determine which “bucket” to put it in. (Which is why we recommend whole life insurance as a savings vehicle, so you don’t have to choose!)

Busting the College Planning Lies

In our book Busting the College Planning Lies, we talk through this calculator in-depth and dive deep into the hidden costs of paying for school. We also provide in-depth solutions to work around the speed bumps that will appeal to a variety of families. And, we also offer up alternatives to the typical college model for those kids who might excel elsewhere.

And if you’d like help personally looking at your family’s education strategy, we’d love to help. You can book with Kim or email us at welcome@prosperitythinkers.com.