Heard the one about the couple who opened an illegal casino in their basement to put a child through college?
You probably recognize it as the new movie, “The House.” But one could be forgiven for thinking it was an episode of 20/20.
The Race to Finance College
The believability factor punctuates just how outlandish the race to finance college has become. People will do almost anything to afford college for their kids. Worse, there are no controls — no mortgage broker or automobile seller with a formula for how much people can afford. It’s a proven recipe for financial disaster that trickles down through generations.
Such financial challenges are known to negatively impact productivity. And college debt and financing are areas where employers can have real impact. A lot of the worst financial decisions are education related, and many come down to information – or lack thereof. It’s the reason we talk at Bright Horizons about an educated approach to employee financial wellness – educational coaching that helps people maximize choices around financial aid, tuition, and saving strategies.
It sounds great on paper. But what might the benefits of educational coaching look like in actual returns?
Shopping for value
People become so attached to brand-name mascots that they neglect to even apply to colleges that could cost them less. As a result of coaching, we’ve seen families save tens of thousands of dollars by opening their search to great schools that not only cost less in tuition, but that also gave their students substantial aid.
What harm can come from tapping into a 401k too early? Aside from penalties, the increased income could make your child ineligible for financial aid – a double whammy. That’s just one of the grand mistakes people can make when they don’t have help to fully understand the implications of financing choices.
Creating a college savings account in your newborn’s name is a great idea, right? Not necessarily. With 18 years to save (and bravo for the forward thinking!) there’s a chance for a tidy sum by high school graduation – enough to impact financial-aid. Putting the account in a parent’s name may in fact be a better idea.
Tangible Returns in Financial Wellness
The act of showing people some alternate approaches has enormous value: it gives parents of young children confidence in their ability to send their children to college tomorrow; and it gives parents with students already in college the confidence to stay solvent while paying today.
Saving from birth is the best bet for comfortably reaching those six-figure sums. But even once at the applying and paying stage, a good coach can show people that there are ways to reach the goal without subsisting on macaroni and cheese or setting up a craps table in your house. And given the cost of financial distractions, the payoffs are going to be for the employee…as well as the organization.