Consequences of an expensive college

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Q. I have twins and they both got into several colleges. I think one kid will pick an expensive one, and the other will pick a cheaper one. I want to pay for both, but I feel like I should also give more money to the kid who chose the cheaper college. Not now, but in the future. How do I do that so I’m being fair to both?
— Weighing options

A. This is a great opportunity to teach your children a very important lesson about money.

Unless there are some extraneous circumstances requiring one child to go to a more expensive school, perhaps for a specific major or an Ivy League offer, you might want to try a different approach.

Chip Wieczorek, a certified financial planner and investment advisor with Tradition Capital Management in Summit, suggests you allocate a sum of money to each child. The child can use the funds for education first, and any remainder could be allocated for a car, a house, graduate level education, and more.

“Education costs have risen well above inflation for the past several decades and I don’t think it is fair for parents to shoulder excessive costs if they aren’t justified,” Wieczorek said.

He said he has several clients who have offered this type of arrangement to their children because they only have a finite amount of funds set aside for education.

“It is interesting to see that the children who do not opt for a less expensive equivalent education will often express regret to their parents a few years after school, especially if they had to take out student loans to make up the difference,” Wieczorek said. “As painful as it is for the parents to hear, they feel it is a good lesson for their children to learn.”

Lastly, Wieczorek said, if your child does opt for the “cash offer” by attending a less expensive school, make the additional funds contingent upon graduation at a minimum.

Also, you could specify dates or milestones for the release of the additional funds like a certain birthday or when he is ready to buy a home, he said.

“This will assure that the large sum of money doesn’t leak out for various expenses, which would defeat the purpose of the gift,” he said.

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NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.