Planning your financial future can be a difficult task, especially in an environment of high inflation, rising college costs and anxiety surrounding mounting student loan debt. For graduating high school seniors and their families, these concerns are especially prevalent.

Survey data from the College Savings Foundation shows that many high school students are aware of the economic conditions they’re graduating into and are being proactive about their financial futures. The survey found that 82 percent of the students surveyed intend to work while they’re in college and that 67 percent are concerned about taking on student debt.

If you are a high school student trying to plan for and finance your education goals, it is a good idea to start saving up money as early as possible. If you are the parent or guardian of a high school student, teaching your child how to budget and build their finances before they graduate could help them feel financially empowered in the long run.

How does Gen Z approach finances?

Generation Z (Gen Z) includes individuals between the ages of 11 and 26. Members of this generation are in a unique position compared to older generations. They grew up in the age of smartphones and the internet, and many of them grew up watching their parents deal with the aftermath of the 2008 recession. These circumstances, along with the COVID-19 pandemic and resulting economic turmoil, have created a generation of young people who tend to be concerned about their finances and hesitant to take on debt.

Older members of Gen Z have reported high levels of financial stress and financial insecurity. A recent Bankrate survey found that young Americans have been disproportionately harmed by inflation and are more likely to delay financial milestones due to the economy. And despite being more hesitant to take on debt than older generations, Gen Z students are more likely to take on student loan debt than older generations and tend to have higher student debt balances.

Younger members of Gen Z seem to be acutely aware of the position their generation is in, particularly in terms of planning for college.

“Kids are getting the message that college is an economic decision,” says Vivian Tsai, Chair of the College Savings Foundation. “It’s an economic investment, but you have to trade that off with the reality. Five years ago, when we were doing the survey, I started noticing that more and more kids were taking more ownership over the economic decision that is going to college and saving for college. And talking about wanting to contribute and talking about not wanting debt.”

The College Savings Foundation’s 2022 survey of high school students found that only 23 percent of respondents were planning to take out student loans to finance their education and that 59 percent were already saving for college.

How have rising tuition costs, COVID-19 and inflation impacted the way Gen Z approaches higher education?

While rising tuition costs were a major concern before COVID-19, the pandemic and its resulting financial fallout definitely contributed to shifting attitudes toward higher education and finances. High school students were already starting to take more ownership over their education, but “COVID just sped that whole process up,” says Vivian Tsai.

“Now the reality is ‘well, how do we make it more affordable?’ and they’re making choices that are good for them- going to community college, transitioning from a two year public college where they’re paying a couple $100 a term for their education and then transferring after two years to a university to complete their bachelor’s degree. Or they’re deciding that maybe rather than going the traditional college route, I’m going to become a vocational specialist in an area that requires apprenticeship or technology expertise and therefore is really more of a technical degree. So there’s just a lot more practicality because they’re seeing the end game, which is as small a debt as possible combined with the potential of having a high earning career.”

The College Savings Foundation’s 2022 survey of high school students found that respondents were most interested in higher education options that offer classes based on practical work experience, competency-based testing that allows them to finish sooner and cut down on costs, and programs that give you credit for actual work experience. The survey also found that 63 percent of respondents view technical and career education or apprenticeship in the same way as college.

These trends are not particularly surprising given rising tuition costs at traditional four-year colleges and the national spotlight on America’s student debt problem. A recent poll by the Wall Street Journal found that 56 percent of Americans lack confidence in the value of a four year college education.

“I would imagine that 10 years from now, higher education is gonna look a little different,” says Tsai, “I think that kids are making different choices… You’re gonna see different forms of education. Northeastern is the kind of university that seems to really resonate with a lot of kids because they offer very practical degrees. They have a Co-Op program, so every kid comes in with a track towards not only getting a high quality education, but they’re also set up through the university with employment. I think you’re gonna see more and more universities doing that.”

Despite the fact that faith in the value of a traditional four year college education seems to be trending downward and students seem to be leaning toward more practical degree programs, liberal arts colleges have played an important role in society and many employers still prefer job candidates with traditional liberal arts degrees.

“We want liberal arts colleges to thrive,” says Tsai, “I mean, that’s what got us here as a nation.”

Tips for financing your college education

If you are a high school student trying to financially prepare for college, there are several things you can do to begin taking ownership of your finances.

  • Increase your financial literacy. Learning how to manage your money, create budgets, leverage financial tools and understand credit are all a part of financial literacy. Learning these skills early on will make it easier for you to make important decisions once you become financially independent. You can access information about personal finances, budgeting and more online. There are even free courses available to help you fill in your knowledge gaps.
  • Start saving early. The sooner you start saving up for college, the better off you will be when the time comes to finance your education. If you are able to, getting a part-time or summer job while in high school is a great way to make money. If your parents or other family members are going to cover any of your higher education costs, make sure to have an honest conversation with them as early as possible to make sure everyone is on the same page.
  • Learn how to budget. Learning how to create and stick to a budget is key to managing your finances. Using a budgeting app makes this process fairly simple. Make sure that you check your budget regularly in order to track expenses and eliminate unnecessary spending.
  • Set up a high-yield savings account. In addition to a checking account, high school students should set up a savings account. This will help you split your money into two categories: money to spend and money to stash away for later. High-yield savings accounts are a particularly good option because they have higher interest rates, which allows your savings to grow more quickly. If you have a job and are making a regular income, it is a good idea to automate your savings. This means setting up automatic transfers of a certain amount from your checking account to your savings account, at regular intervals.
  • Investigate your funding options. College is expensive, but there are a variety of scholarships, grants, work study programs and loans available to help you cover the costs. If you need financial aid to pay for college or are considering a loan, you should start by filling out the Free Application for Federal Student Aid (FAFSA). This will allow you to see what federal aid and loans you may be eligible for.

The benefits of investing in a 529 plan

While working, saving up money and making smart financial decisions can help high school students save up for college, it will likely take more to cover the costs of higher education. According to Vivian Tsai and the College Savings Foundation, one of the best things students and their parents can do to financially prepare for college is investing in a 529 plan.

A 529 plan is an education savings investment account that offers tax-free growth and withdrawals. You can use a 529 plan to pay for qualified expenses related to your education. This includes tuition and fees, books, supplies and computer technology. You can open a 529 plan for yourself, or your parents, grandparents or legal guardian can open one for you.

“When you’ve got a 529 plan, not only do you have the tax advantages of putting money in and investing in it, and presuming the investments go the way they have historically, you will have more money in the future than you have today. And all that money will come out tax free for you to pay for that future educational account,” says Vivian Tsai.

One of the major advantages of a 529 plan is that they are earmarked funds. This means that they are set aside for a specific purpose and can only be used for that purpose. This set up allows students and their families to avoid the temptation to spend money that would otherwise be used for the student’s education.

“For me, I think the best part of the 529 plan is the fact that these are earmarked funds. They are outside the course of your typical student’s, say, student account at their local bank that they’re using to pay for their games and their meals at school and whatnot,” says Tsai.

Should you take out student loans to pay for college?

Taking on debt is a major financial decision that should not be taken lightly. However, taking out student loans to pay for college is extremely common and federal student loans come with benefits like borrower protection programs, income driven repayment programs and fixed interest rates regardless of your credit score.

It is also worth noting that taking on debt is not an inherently bad thing, and investing in your education and future is typically worth the risk. Vivian Tsai’s biggest piece of advice for students is to invest in themselves above all else.

“Finish college. Even if you don’t have enough money to be able to go through college without taking a loan. Loans are not a bad thing. As long as there is a way and a method to pay back that loan at the end of it.”

— Vivian TsaiChair of the College Savings Foundation

“We all take loans to purchase our first house. That’s a huge ticket item. You’re investing in it…” says Tsai, “When I’m talking to college students, or high school students, it’s just like, invest in yourself. You are investing in yourself. So by completing college, you’re investing in yourself and all other things fall into place. The economics of an income afterwards will happen. Don’t get wrapped up in this ‘I don’t want debt. Therefore, I’m not going to college. I don’t want debt. Therefore, I’m not going to invest in myself.’”

Tips for managing your finances during college

If you decide to pursue an education after high school, whether it’s a four-year college, vocational training, community college or technical school- it is important that you know how to manage your finances while you’re in school. This typically includes creating and sticking to a budget, as well as maintaining a savings account. Here are some additional tips for managing your finances during college.

  • Take advantage of student discounts. Many businesses and organizations offer discounts for students. Even if a business does not advertise a student discount, it is worth asking before making a purchase. You typically need to provide proof such as a student ID to receive student discounts.
  • Save money wherever you can. From shopping at thrift stores to buying books secondhand, there are many ways you can be creative and cut costs as a college student. For example, many college campuses host events where free food is served. College campuses also tend to have free amenities students should take advantage of, such as student health centers and on-campus gyms.
  • Get a job on or off campus. Working part or full time while you’re in school is a great way to ensure that you have enough money to cover your everyday expenses. Many colleges have on-campus jobs available. These jobs tend to be more flexible for students since they can typically work around your school schedule and, depending on the job, you can even study and do homework while you’re working.
  • Use your meal plan. If you or your family pay for a meal plan, make sure that you use it rather than spending extra money on other food. Schools typically have multiple meal plan options available, so if you find that you are not using all of your allotted meals per week, switching to a smaller plan could help you save some money.
  • Become a resident advisor. Resident advisors (RAs) are college students who act as mentors for younger college students. The specific job responsibilities and compensation for being an RA vary by school, but they are generally compensated with free room and board. You typically cannot apply for this position as a first-year student, but taking on an RA position could be a great way to save on room and board for college sophomores, juniors and seniors.