A Guide to Helping Clients with Education Savings

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Advisors can better serve their clients on one of the most important investments they will ever make – their family’s education.

At a time when advisors are focused on delivering the value of a trusted guide to serve all of their clients’ financial needs, there is an opportunity available to them in education savings. Sending one or more children to college will be one of the largest financial commitments a family will make. Yet for many advisors, the amount of information they need to adequately prepare to engage their clients in this vital issue is daunting.

For example, advisors may not be familiar with education savings tools, such as the many 529 college savings plans available in states across the U.S., or may not be aware of how recent legislation has extended the use of 529s beyond post-secondary education to fund K-12. Just this past December, the SECURE Act extended them to cover costs associated with apprenticeships and re-payments on student loans.

This knowledge will be invaluable in contributing to a family’s overall financial picture and cementing the long-term client relationship. It also offers an opportunity to approach new clients, such as grandparents and adult children of clients, by including college savings in a holistic approach to serving the entire financial needs of the family, as well as estate planning solutions.

A recent TDAmeritrade survey showed just how much of a family’s goal this has become. Among parents, 84% were currently saving or have already saved for their child’s college; and 79% were “somewhat” or “very” stressed about their child paying them back for college. Among Gen Zs (15-21), 62% are saving for college; and 63% of them are stressed about paying back student loan debt.

Let’s look at the hypothetical client of millennial parents, themselves saddled with student debt1 and the likelihood of working a long, varied career requiring additional education or re-training along the way. Not only can their children be beneficiaries of higher-education savings, but they themselves may also be able to utilize 529 plans.

The cost of education will be one of a family’s largest financial expenses, especially when there are multiple children. The average cost of raising a child today to age 18 is estimated to be over $230,000. For college-bound children, it’s wise to plan five years of college, which currently could amount to an additional $127,000 for in-state public school or $255,000 for a private school for parents planning to pay full tuition and living expenses. Professional certifications can run from several hundred to several thousand dollars per year, plus organization memberships.