Financial advisors are often asked if parents should pay for their children's college education or tell them to get loans.

My experience is that this is not only a financial decision. This is a wonderful opportunity for parents and others to model values and encourage good habits in their children.

Usually parents must start to save for their children's education long before their talents and aspirations are developed. I believe it is worthwhile for the parents to consider what part they want their children to play in paying for their own education. If the parents want to demonstrate the importance of balancing multiple needs, such as the parents' retirement, education and a reasonable lifestyle, they should develop a plan to reflect these goals.

Having children participate in the planning and paying some of the expenses can reduce a sense of entitlement. Some believe that encouraging student contributions by requiring some amount of work is desirable. I usually recommend limiting work to 15 to 20 hours per week when in school. Loans can be useful not only in spreading out the costs over time but as a way for students to learn how to manage credit responsibly. If mentored properly, children will learn the benefits of using debt for life enriching purposes. Managing loans can also teach students spending and personal control. When the loan is paid off, the payment amount can be put towards another goal. These are some values that can be modeled.

You should begin financial discussions with your children at the same time you begin to discuss post high school plans. This ties together the process of matching the students' talents, aspirations and financial considerations. Discussing college funding gives you the opportunity to explain your retirement and other financial plans. This makes it clear to all how college finances fit into the picture. You can estimate a realistic amount for a student to contribute from earnings by using minimum wage and 15 hours per week, minus their expenses. Add in the savings accumulated and what parents can pay out of normal income, and you will have an idea of what is available. Average and specific college cost information is readily available from various sources. The shortfall will need to be made up by loans, scholarships or grants.

For parents starting the college planning process, I recommend:

•    Start early - Saving for 18 years is far better than waiting until there are only two years to go.
•    Enlist help - Ask relatives and friends to make gifts to the child's education.
•    Determine your own financial goals, especially your retirement plan. I do not recommend shortchanging your retirement savings because you will not have time to make it up after your children complete college.
•    As part of your financial planning, include a preliminary plan for college finances. All the options you will discuss later with your child should be considered. The goal here is to determine the savings needed.
•    Look at the savings options including prepaid tuition and 529 plans, Coverdell, UGMA/UTMA, IRAs and others that may be available to you. Choose the investments, the amount to be saved and start now!