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Is private education right for your family?

Children Working on HomeworkThe time has officially arrived; we are sending our eldest into the world for the first time. Being that she is 5 years old, she is not getting an apartment in the city, but equally as big of a deal: she is going to kindergarten. It’s fun to watch the newness of the environment captivate her! As an example, picking out her lunchbox has been interesting… to say the least. I’ve watched my wife’s frustrations grow as they negotiate back and forth on color, size, style, and character. I’ve picked out shoes with both and I must say, my daughter comes by it honestly.

However, the planning and debates didn’t start with a lunch box; in fact, they started shortly after my wife and I were married. We discussed how many children we wanted (we had fewer) and how we thought to raise them (some on blind theory) before we even said “I do.”

Deciding on private education involves more than just finance

The education discussion came later. My wife broached the conversation and presented private education as an option. As a former educator herself, she approached this topic by looking at needs and opportunities. I took a different route and immediately went into a “fiscally responsible and logical” way of thinking, solving for total cost and return on investment.

College Student

To my surprise, the more people I talked to, the more I realized that I was only looking at half of the equation!

Note: I know how tender of a subject this is for some, so please know that I am not advocating that private education is right for every family. I have found as a parent that this is a consistent topic among my peers, and something we’ve learned a great deal about while considering our options. I hope that some of these conversation points will help you along your journey!

Considering a private school? Some factors to keep in mind

  1. Expectations and Investment: If we are spending our wages on education either in tuition or taxes — with the expectation that our educators will act as “substitute parents” or “save” our children — we may find ourselves wanting. This is where the investment of the parents and community can far outweigh the benefits of any school. Children are one of our nation’s greatest assets and require an ongoing investment — Whitney Houston even sang about it! But the bottom line is that no school is going to sign off on your children being a guaranteed success in the world simply by purchasing the school’s product. So, with your collaboration, think of what it is that the school offers your child in addition that you are willing to sacrifice for.
  2. Affordability: Why pay for something that is accessible and free? Depending on each unique situation, it can take the choice from fulfilling a need to exploring greater, or different, opportunities. If you determine that private education is right for your family, realize the financial impact it will have. Make an agreement to take the tuition year by year — regardless of your current outlook. You will need to ensure that education expenses have their place in your overall family budget. School might be a 13-year expense (not counting college) but retirement is hopefully a 30-year adventure! Finally, ask for help. Many schools or government programs offer aid to some students; don’t be afraid to reach out or ask about these options.
  3. Financial Planning: If private education is a consideration, you can help plan for the expense with contributions to a 529 account. This year — with the changes to the tax code — the IRS is allowing $10,000 annual distributions for each beneficiary for private education (K-12). As money becomes available, you can continue planning for tuition years in advance. Within a 529, after-tax money can be invested in the market, and withdrawn tax free for tuition. This is one more way to earmark money as it comes in for birthdays, Christmas, tax refunds, gifting, and so on. If you have any questions about 529 plans, contact your financial advisor!

Schoolwork Together

There are many options out there, and just like our children themselves, one size does not fit all. Between your children’s needs, the flexibility in your finances, and your unique situation – you can decide as a family while keeping your values in mind.

August 2018

 

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. No strategy assures success or protects against loss. Investing involves risk including loss of principal.

Prior to investing in a 529 Plan investors should consider whether the investor’s or designated beneficiary’s home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state’s qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.

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