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August marks the beginning of back-to-school season. If you have students in your household, you may be feeling the annual scramble of school supply lists, shopping for clothing and shoes, tuition, fees, extracurricular activities and more. Add to that the ongoing work of funding college savings accounts, and the expenses can quickly add up.

Fortunately, approaching back-to-school season with a clear strategy can turn your family’s education-related spending into a coordinated part of your broader financial plan. The following strategies can help.

1 – Treat education expenses as a core line item in your budget. 

It’s important to treat education expenses in the same manner as other key spending priorities. Start by estimating the full annual cost across all of your children, including:

• School tuition and mandatory fees
• Uniforms/clothing
• Technology fees, software and device purchase requirements
• Enrichment programs
• Sports, arts and other extracurricular activities
• Tutoring, academic coaching and test preparation
• Future college costs based on multiple scenarios (public in-state, public out-of-state, private, specialized programs, etc.)
• PTO fees and other nonprofit education-related expenses

Once you have an understanding of your potential expenses, decide what portion of your discretionary cash flow to direct to education versus retirement contributions, taxable investments and other priorities. This can help ensure education spending does not interfere with your other long-term financial objectives.

2 – Maximize your college saving strategy.

If your financial plans include paying for your children’s college expenses, it’s important to have a savings plan in place. Consider implementing the following strategies.

• Maximize contributions to 529 savings plans. In some situations, it may make sense to front-load up to five years of gifts in a single year to help minimize your tax exposure and optimize your savings.
• Encourage grandparents and other family members to help by making 529 plan contributions or direct tuition payments to a university.
• Evaluate whether it makes sense to layer additional college savings vehicles, such as Coverdell education savings accounts or UTMA/UGMA accounts.
• Regularly revisit projected college costs to help ensure you remain on track with the latest expenses.

3 – Manage extracurriculars with intention. 

Elite extracurricular expenses, such as travel sports, specialized coaching, private lessons and professional academic enrichment can quickly rival the cost of tuition, which is why it’s important to view these as discretionary, rather than non-discretionary expenses. Consider what you’re paying versus your child’s sustained interest and potential developmental return, and establish a clear family activity budget. This can help ensure activity costs remain in line with your overall financial plan, family values and priorities.

4 – Don’t sacrifice your own financial future. 

This can be a difficult tip for many parents who want to prioritize their children’s education expenses. However, it’s vital to ensure that school-related costs do not derail your long-term financial security by getting in the way of your retirement savings or emergency reserves. As you’re planning for education expenses, it’s important to also:

• Continually contribute to your retirement savings accounts, even during expensive education years.
• Avoid taking on high-interest debt or home equity lines of credit to pay for education.
• Periodically model the impact education spending has on your projected net worth, retirement readiness and estate planning goals.
• Carefully manage lifestyle creep to avoid overspending.

Could you use some help ensuring education expenses don’t derail your long-term financial objectives? We would love to have a conversation. At North Oaks, we support clients in building strong financial futures, one brick at a time. Schedule a call to learn more.