One key tenet of being a financial advisor is helping clients better understand the real value and costs associated with making some of life’s most important decisions. Clients often look at the world through a straw and do not always realize exactly what the real costs are of a particular financial planning strategy. For many clients, especially those in the high-net-worth category, college planning for their children is among the most difficult and important decisions they will have to make in their lifetime. The emotional stress around this life event is enormous, as it is one of the largest expenses a client and his/her family will make, second only to the purchase of the family home or a business. Why? From a purely economic sense, education is unlike a home or a potentially profitable business because college expenses permanently leave the client’s balance sheet. While the personal pleasure of watching one’s children achieve academic and career success is incredibly satisfying, advisors need to make sure that clients understand the real cost of this momentous decision. Below are some suggestions for helping high-net-worth clients navigate through the emotions, stress and vast expenses associated with funding a child’s education.

The Selection Process—Remember You Are In The Driver’s Seat

Families tend to place a lot of weight on what their 17-year-old child wants during the college search. Looking at this from a financial planning perspective, the idea that a high school student is dictating one of the most significant financial decisions that will impact the entire family can be impractical when you think about the times when this same child struggled with curfew, college applications and doing laundry. At MainLine, we believe that selecting a college is a family decision—one that is comprised of a variety of factors, including, but not limited to, the finances of the family. A decision of this magnitude needs to be contemplated and modeled carefully, without making this the sole decision of a teenager in his/her junior year of high school.

Know Your Choices And Their Financial Impact

Choosing a college is a complex decision, with many factors for a family to evaluate. While it is important to try to incorporate a significant number of those factors into discussions with clients, as an advisor the primary focus should be on the financial impact. How will the financial factors affect the family’s net worth and balance sheet? 

Let’s first examine the current costs of education. For purposes of this discussion, a student’s options will be characterized as public in-state schools, public out-of-state schools and private colleges. According to MoneyGuide Pro as reported by Peterson’s, the 2016 average national tuition for these three representative samples are:  

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