My son went to a private school for a year. If we hadn’t moved from the region, I think I may have had to start selling plasma on the side to afford tuition.

It’s that expensive.

But you can’t deny the value of a good education. In fact, Dr. Jeffrey Sachs presents a horrifying case in his new book, The Price of Civilization. I don’t want to devolve this blog into the politics of this book. This blog, which refuses to stand for anything, doesn’t endorse any politics associated with the piece (enough disclaimers for ya’?).

My only point:  the statistics in the tome don’t lie: the key to life isn’t in getting an advanced degree, but there’s a more-than-high probability that your quality of life is seriously screwed if you don’t have one.

You’re still going to have to work hard and secure a job, two factors that ain’t gonna come easy, even with the degree in-hand.

So, you being the amazing parent that you are, decide to begin saving for junior’s education.

And that’s where the fun begins.

Most people start from square 10, rather than square 1.  That’s because the silly marketing departments for investment companies encourage you to start from the middle, with their emphasis on whether you should use a 529 plan or a pre-paid tuition option. How about mutual funds?  Coverdell?  Decide what you want to save into already?

Remember the moldy financial advice to look at the map before starting your car?  It’s advice that’s been rolled out often because it’s true.  Start with your goal.

Of course, it’s impossible to ask a two year old where she wants to attend college.  I take that back. You can ask, but the answer won’t be very accurate. So, as a financial planner, I had to get creative. We had to start with affordability.  My question became “what can a parent afford?’

Good News on the Affordable Front

You can probably afford more education than you believe. I know that scholarship opportunities are overrated. It’s actually the calculation most financial planners use that are inaccurate.

Let’s visit a reliable website and view the college costs.  We’ll focus on Kentucky University. Mostly because I’ve never been accused of being a fan of this school for no greater reason than I always want their basketball team to lose.  I know. I’m petty.  Let’s move on.

We’ll begin by finding reliable third-party information:  Peterson’s College Search. At thefreefinancialadvisor, we like to use websites which don’t have an axe to grind. Petersons is a great site because they only want to be your go-to place for education statistics and information.  (and no, thank you, I’m not being paid by Petersons, either.)

So, let’s start here:  http://www.petersons.com/college-search/university-of-kentucky-cost-and-financial-aid-000_10001934_10003.aspx

We’ll pretend you’re in-state for this exercise.  See the bottom line?  No?  You’re right.  We’re going to have to perform some math.

First, there’s tuition at $7,656.  Then we skip down to fees, which are $954 for full-time students.  Finally, gaze a paragraph down to room and board.  That’s an additional $9,439.

The total cost of education, per year, is going to be $7656 + $954 + 9,439 = $ 18,049. 

For this exercise, we’ll assume that you plan to pay all of these costs without scholarship aid. At least for planning purposes with your two year old, you shouldn’t count on aid. What happens if you plan on aid and don’t receive a package?

At this point you should be asking yourself, what about this number is affordable? 

The good news is that the $9,439 number for room in board is correct. However, you may discount a portion of this price from your family budget.

In many financial planning meetings, the advisor will neglect to back down your costs associated with junior living at home. If your little-pride-and-joy moves away to college, you’ll no longer be responsible for food at home, and if your child leaves lights on as much as mine does, your utility bills will drop.

Why doesn’t an advisor back down these costs?

There are possible two reasons:  either she isn’t very good at her job, or the much more malicious reason.

She is hoping to jack up the cost of education to raise the amount you’ll need to save. This amount will go into a fund she receives a commission for.

Now you’re thinking to yourself, there’s no way this really happens.

Sadly, you probably aren’t thinking that. So much for imagining our readers are all happy-go-lucky, believe-everything-you-read people. Nope.

Whether malicious or not, when you’re ready to start saving for college (and based on these numbers above, you should have started yesterday), be sure and discount the room and board numbers to factor in the savings you’ll find when junior is no longer eating you out of house and home.

Happy Education Planning,

Joe