Your client needs an education spending plan

Wealth Solutions

Your client needs an education spending plan

A successful wealth management approach to your clients’ education spending.

Experienced planners know that there is little clients hold closer to their hearts, or their purse strings, than their children. Boosted by investment vehicles like 529 plans, the college savings conversation is appreciated by many clients. Given growing complexities in the education life cycle, a savings plan is only a start. A successful wealth management approach to your clients’ education spending is also necessary.

I would recommend an education spending summary for all clients nearing and throughout the college years. This mimics an investment policy statement or withdrawal policy in its organization and structure, and could help planners and clients partner for optimal outcomes. While most education spending plans would be created for parents planning for their children’s education, you could also draft a document for grandparents if they plan to assist with college. This would be appreciated on a multigenerational level if grandparents and parents are both contributing, as is the case in many high-net-worth situations.

Here are the components I would suggest for an education summary:

  • Description of planned education. This can be formulated early and will likely evolve as college approaches or during college as academic pursuits become clear. In early high school, you may note plans to go to a state school with the parents funding 70% of the costs. During college you might include the specific college, details on the program, a planned graduation date, anticipated additional education and expected costs. If your clients are funding earlier education, such as private school, make sure to include those details and consider the summary earlier in the education life cycle.
  • Sources of funds. This section should include a description of assets and cash flow available for education expenses. Examples might include 529s (make sure to separate if there are 529s with multiple owners like parents and grandparents); other accounts tagged for college like Coverdell plans, prepaid tuition or savings bonds; current income of parents; contributions from students through employment or savings; scholarships or grants; and student or parent loans.
  • College spending strategy. A narrative section describing the overall strategy for paying for college should keep you and your clients on the same page through the college years. With tax credits, deductions and differences in reporting requirements for the FAFSA depending on sources and asset ownership, your clients’ spending strategy should be thoughtful and planned well in advance. Don’t miss tax breaks if your clients’ income is within thresholds. Encourage your clients to promptly file an FAFSA annually regardless of need in order to maximize scholarships and grants. Hold off on the use of funds from extended family for optimal FAFSA outcomes.
  • Important deadlines. Note important dates in this section. This could include dates to adjust college savings investment allocations as the time frame narrows, FAFSA filing times, tuition payments, etc. Create reminders within your CRM to facilitate proactive touches with your clients as these dates approach.
  • Student expectations. Encourage your clients to develop a communication strategy as they involve their children in the college funding conversation. This can be a wonderful way to encourage fiscal responsibility for their child both currently and in the future. This section might detail the timing of plans for discussing family financial commitments with the prospective student or expectations of student achievement to maintain family support. This encourages the family to develop a philosophy on education finances that can be articulated to other family members.

A thoughtful approach to education spending opens the door to another important topic – preparing and retaining your next generation of clients. A natural component of the education planning timeline may be a plan for the introduction of basic financial concepts for the student. This could be done through brief meetings with your firm or a more formalized summer educational series when many of your clients’ children might be accessible. Your clients will be appreciative and you’ll have a natural, efficient introduction to the coveted next generation within your firm.

Your clients will appreciate your forethought and specificity that the well-developed education spending strategy provides. You will be able to do a better job in maximizing positive outcomes on your clients’ behalf. That’s a win-win on behalf of many clients’ most valuable asset – their children! 

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Melissa Joy and not necessarily those of Raymond James. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Melissa Joy is a Financial Advisor with Raymond James Financial Services, Inc. Member FINRA/SIPC located in Southfield, MI (248-948-7900).



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