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Thinking About Private School for Your
Kids? The Earlier You Start, the Better
Considering private grammar and high school is a parent's
first introduction to a lifetime of saving for a child's
education.
Depending on where you live, you might face a decision to
choose between private and public schools, and there might not
be much of a choice. It's an expensive proposition made even
more complicated by the fact that you have to save for college
at the same time. Some are able to pay for private school today
plus save for college. For others they may have to plan on
'paying as they go' for all schooling today and for college.
How do parents make it work? Some have the money to make
anything work, but for those who don't, it's essential to plan
from the time your child is very young. From the beginning, keep
abreast of every possible resource for scholarships, discounts,
loan programs and other forms of financial aid.
It makes sense to find a financial planner, such as a
CERTIFIED FINANCIAL PLANNER professional, who can link a
child's pre-college education planning to the financial planning
necessary for college, grad school and beyond. Here are some
ideas to start with:
How much? The National Association of Independent
Schools (NAIS), a national organization representing private
pre-schools, elementary and secondary schools, estimates that
the median tuition in 2006-07 for all grades of private day
schools was $15,894. For boarding school, the price is almost
double.
How much aid? A little more than 18 percent of all
private school students are receiving some form of aid at an
average grant of $10,871. Financial aid grants for private
elementary and secondary schools works roughly the same as
college they are awarded on the basis of need. Grants are the
best form of financial aid because they don't have to be paid
back.
Applying for aid: Most schools use the Parents'
Financial Statement (PFS) from the School and Student Service
for Financial Aid (SSS). This is a service owned by NAIS that
helps schools determine how much a family can afford to pay for
school tuition and other educational expenses. If the school you
are considering does not use SSS, be sure to ask what steps you
need to follow in order to apply for assistance. The form
considers how many children you're paying tuition for in K-12 or
college and how high the cost of living is in your area.
Don't forget to plan for retirement: You'll do
anything for your kids, but you have to pay yourself first. Talk
to a financial planner to see how much you'll need in retirement
and how much you'll need to save weekly to make that goal. Keep
in mind that your greatest potential for a successful retirement
comes from starting savings early and you can't forfeit that in
favor of your child's education.
Consider a Coverdell Account: This is not a universal
recommendation because some families may benefit more from
savings plans customized to their situation. Coverdell Education
Savings Accounts formerly known as education IRAs are trusts
created to save money for a child's primary, secondary or
college education. Contributions are relatively small $2,000
per beneficiary from all sources during the year though there
may be exceptions for certain types of rollovers. Yet since
Coverdell Education Savings Accounts are considered the asset of
the account owner, you may want to keep it in your name since an
account in the student's name could adversely affect financial
aid eligibility.
Enlist the grandparents: If your parents can afford to
help, they have several options to help you save for your
child's education without triggering their gift tax obligation.
First, each grandparent can give up to $12,000 tax-free to each
child or they can give money up to any amount directly to the
school without triggering the gift tax. Also, they can give up
to $2,000 annually to a Coverdell account you've set up for the
child. For college, they can also gift money to a 529 College
Savings Plan or a Uniform Transfers to Minors Act (UTMA) account
for your child.
Don't use debt as a Band-Aid: Avoid the trap of being
forced to use debt while trying to "do it all." Stay
within your means. If you find yourself close to using your debt
options, enlist the help of a financial planner to talk through
ways to adjust your spending or find student aid.
June 2007 This column is produced by the Financial
Planning Association, the membership organization for the
financial planning community, and is provided by Don McCarty of
Financial Decision Partners, a local member of the FPA.
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