How to Tell Your Kids That They're the Ones Who Will Be Paying for College

It doesn't matter how old they are, if you have kids, you've probably wondered how you're going to pay for college when the time comes. Some parents start a college fund for kids as soon as their kids are born, but they're the outliers. Most of us worry about it, but between day-to-day expenses, our own college loans, and the increasingly common large amounts of debt people in their 20s and 30s are carrying these days, paying for college might seem like a rich-person dream.

In fact, a lot of parents, aren't planning on paying for their children's higher education at all. According to data compiled by Fidelity, just 29% of parents say they plan to foot the entire bill for their kids to go to college, which is down from 43% in 2016. Most parents plan to pay for some, around 62% of the total cost, down from 72%. All this means is that kids will be more financially responsible for their college education than in years past. And considering all the news that rising tuitions and costs associated with college have gotten over the last several years, paying for college could result in a pretty hefty price tag.

Average tuition plus fees and room and board at public universities for in-state students is currently about $20,000, attendance at those same universities for out-of-state students jumps up to roughly $36,000, and private schools? Whew, let's just say you'll need about $50,000 per year to attend a private college or university. And if parents, on average, are only able to cough up about 62% of the total bill, where does the rest come from? Usually student loans. Ouch.

So how can you prepare your child for footing at least some of the bill for their education? We talked to a few financial experts to learn how to soften the blow and make sure your teen is prepared both mentally and financially to shoulder some of the cost.

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Talk, talk, talk

If you're in this boat and plan to either split the expenses with your teenager or if they'll have to shoulder the whole bill, it's important that you talk to them about it well prior to the first day of their freshman year.

"This isn't just a conversation in a vacuum about the fact that the child must pay for college but rather a series of teachable moments to help your child learn about money, savings, and expenses," explains Lisa Hutter, senior director of wealth planning for Wells Fargo Private Bank in Austin, Texas. "If you start talking early about how much college costs and saving for that expense together it becomes a cost that the child might expect to take on his or herself or co-own with their parent."

Include them in the day-to-day

Ensuring that kids understand, from an early age, the value of money and how our financial system works is an important step.

"Start early by having your children understand the value of money," says Hutter. "Show them your monthly bills; share with them how much it costs to pay for your utilities and other recurring costs. When you vacation, have your child plan with you and compare the costs of travel." Including kids, even young kids, in the financial aspects of family-life can go a long way to helping them understand finances and preparing them for the future. It also gives them a feeling of ownership and responsibility when they're included in family financial discussions.

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Do the math

Once kids are old enough to have a firm grasp on the value of money, Cory Chapman, personal finance coach and CEO of EFC Wealth Management in Los Angeles, CA, says it's time to do the math. Parents should "work the numbers with their child, help come up with options and explain what their future debt could be. Add up how much four years of college will cost. Then do the math on how much interest they would be paying on any loans they need. It's also important for kids to understand interest starts accruing the day the loan is taken out."

If your kid has their heart set on attending an out-of-state private school, show them the difference long-term between different schools in different places. Once they see how student loan interest stacks up over time for a private school they may be more willing to consider an in-state public college where their debt load will be significantly smaller when it comes time to repay those loans.

Check out all the aid options

Student loans aren't the only way to pay for school. Have your child sit down with their guidance counselor to find out what other options are available. Merit-based scholarships and grants are fantastic options that don't require repayment. As long as your child maintains a certain GPA, these programs will pay a portion, or sometimes all, of their college expenses.

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Help them save

Even if it's only a little bit each week, any amount of money saved before the first tuition bill arrives will lessen the blow. Help them open a savings account and encourage them to add money to it regularly. Start discussing different investment strategies—Hutter says it's never too early.

"Talk with your child about the stock market and investments. Help them learn that they can save by investing in different companies and earn money that way—perhaps allow them a 'phantom' portfolio that you track together. This is where the child does research on different companies and chooses a handful to hypothetically invest in," she explains. "Write down the value at the hypothetical investment date and check in on it regularly; did the stock rise or fall in price and why."

It's an unfortunate fact that college expenses are at record highs right now and will just keep climbing. Arming your child with the knowledge they need to make smart financial decisions will help keep them, if not debt-free when they graduate, at least debt-aware, and they'll have the tools to manage their debt wisely and, hopefully, pay it off before it's time for their kids to go to college.