by The Queen on June 8, 2009
in College
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This is from my segment on Atlanta & Company on June 8, 2009.
Having kids – it used to be midnight feedings and diaper changes that kept parents up at night. Now it’s the cost of a college education. An average private university education today costs around $100,000. For children just entering kindergarten that cost will be around $250,000 by the time they enter college. Multiply that by the number of kids in the family and you can see why parents can’t sleep at night.
That’s why it’s important for parents to start saving for their children’s education early and regularly.
529 Savings Plans
529 Savings Plans are special savings accounts and investments designated only for college expenses. They are becoming increasingly popular and easy to find and manage. Here are the key features:
- Contribute after tax dollars and they will grow tax free as long as the distributions are made for college expenses.
- The federal government doesn’t offer a contribution tax deduction but many states offer a state income tax deduction for contributions in their state plan.
- No matter what state plan you enroll in, the money can be used to attend any accredited college in any state.
- There are no income limits or annual contribution limits.
- The parent or guardian is the custodian of the account and the child is the beneficiary. Thus the account is considered part of the parents’ assets for financial aid purposes and calculated at a lower rate.
To learn more about the benefits of 529 plans check out http://www.savingforcollege.com/
529 Prepaid Plans
529 Prepaid Plans allow parents to pre-purchase a future college education at today’s prices. These are state based and each has it’s own set of rules and regulations as to how soon and how much you can contribute. These plans are most recommended for parents who are fairly certain their child will attend college in a certain state. While these plans were popular they are no longer as popular and many states are no longer participating.
Coverdell Education Savings Accounts
Another college savings plan created by the government is a Coverdell Education Savings Account. Like a 529, the contributions are not tax deductible but the earnings are tax free if used for education expenses. Unlike a 529, a Coverdell Education Savings Account can actually be used to pay for any education expense from K-12 and college. Qualified expenses even include academic tutoring, books, supplies and equipment. There are income and contribution limits but this account could be a great complement to a 529 plan.
Tips for Saving
- Begin saving early – the earlier you start saving, the more time your money has to grow.
- Don’t worry about the amount – many parents delay saving for college because they feel they need to invest a larger amount. Just start saving something. As your kids grow and your income grows, save more.
- Get your kids involved – you’re saving for your kids, so don’t keep them in the dark. Show them how much you are saving and your progress. Get them involved, so when your kid asks you for the latest and greatest new shoes or gadget you can say you are saving for college.
- Put your own oxygen mask on first – as they tell you on every airline flight, take care of yourself before you take care of your child. Make sure you are saving for your retirement before you save for college. There are loans for college but there are no loans for retirement.
by The Queen on May 25, 2009
in College
This is from my segment on Atlanta & Company on May 25, 2009.
It’s that time of year again. Colleges and universities are filled with students taking in the sites. Yes, high school students and their parents are taking college tours across the country. They are checking out classrooms and dorms and wondering if this is where they will call home the next four years. If only the college tour included price tags on all the sites.
College is expensive but no doubt worth it. According to the Census Bureau the average high school graduate earns $31,000 whereas the average college graduate earns nearly double that. But do you have to go to a big name school to earn big bucks? While it might have been true for the parents’ generation, it is no longer the case.
Getting In
Get Started Early– Colleges and universities have greatly expanded their choice of programs and majors. Each program has its own requirements and applications. High school students should begin looking at colleges early in their junior year in order to be able to research and compare all the programs. They need to begin to cultivate relationships with the college admissions advisors. Ideally, the senior year should be about finishing and submitting applications and the mountains of forms not researching schools.
Network With Young Alums – Most high school students have a chance to talk with current college students and perhaps meet older alumni on other occasions. But the real wisdom comes from young alums. They just graduated and can give you real advice and feedback on their education. They are also more comfortable talking about financial aid and scholarships now that they are done. Current students tend to be more guarded about talking about money and other important details.
Don’t Count on a Backup School – The dynamics of college admissions have changed in this economy especially in states with lottery or state supported scholarships. Traditionally, private schools have been harder to get into than public schools. But in a tough economy public schools have been flooded with applications from well qualified applicants looking for lower tuition. So you can no longer rely on the state school as your backup.
Paying For It
Pay For a Tutor Not Tuition – It’s cheaper to pay for a tutor in high school than tuition in college. So focus your efforts on getting stellar grades in high school and on admission tests. These scores can literally be worth tens of thousands of dollars in college tuition. The better your scores the more likely you will qualify for private and public scholarships. So investing in a good tutor in high school could literally payoff big in college.
Get Started Early – Money goes fast so if you will need money to pay for your college you have to be the early worm. There are many sources for aid so you should research your options early and get organized so you don’t miss any deadlines. Sources for aid include private scholarships and college-based scholarships awarded on merit as well as need based aid provided by the federal government and many private schools.
Make Yourself Special – There are billions of dollars of scholarships awarded every year. You can get a piece of the pie too but it isn’t going to be served to you on a silver platter. You have to work for it and spend time and effort finding and applying for scholarships. A great resource is http://www.finaid.org/ There are many scholarships for specific groups, organizations or companies so think of everything the student or parents are affiliated with and don’t leave any stone unturned. For example there are scholarships through AAA, Google and even Coca Cola.
The Decision
Pay For Learning Not Amenities– Colleges are not immune to the keeping up with the Jones’s syndrome. They are spending millions of dollars to add new bling to their campuses like fancy dorms, dining centers with international cuisines and climbing walls. So don’t fall for the fancy new tables and chairs look at the quality of the faculty and programs. Would you rather sit in a new classroom learning from a new TA or an old classroom learning from an experienced professor with a PhD?
Forget the Big Names – If you are looking at taking out tens of thousands of dollars of student loans to pay for a big name school you think will lead to big gains in the future, think again. Big names no longer equal big salaries and opportunities at graduation. New studies have shown there are very little salary differences between graduates of prestigious universities and public universities. And if you are thinking it’s the connections you’ll make, rethink that too. The old-boy networks are eroding and a study from the University of Pennsylvania shows that the number of top executives with Ivy League degrees is decreasing while the number of top executives with public university degrees is increasing.
by The Queen on May 18, 2009
in College
This is from my segment on Atlanta & Company on May 18, 2009.
It’s one of the proudest moments in any parent’s life—dropping off your child at college. Ah, what a sense of accomplishment. But get ready to drop off your bank account at college too. Going to college can be expensive and we’re not even talking about the cost of tuition.
Most parents think all the costs of college are listed in the college acceptance package, but that is just the beginning. You need to factor in many other costs too.
Give them a salary
You’re sending your kids to college on their way to the real world, so introduce them to the real world early. Give them responsibility for their finances when they head off to college. The best way for them and you is to give them a salary. Give them a fixed biweekly salary and teach them how to budget. If you just offer to help pay for things and give them a credit card to charge other things, you are setting yourself up for disaster.
When you give them a salary they can learn to make it work and you have limited your expenses by giving a firm amount. To come up with the amount sit down with your student and figure out all the costs and who will be responsible for what. A good resource to start the conversation is 40 Money Management Tips Every College Student Should Know.
Living costs
Part of the college experience is living on campus and enjoying dorm life and cafeteria food. This is also a great way for parents to control costs. While on paper living with roommates in an off campus apartment seems cheaper, it almost always ends costing way more. Not only are there numerous more monthly bills to pay like rent, utility bills and grocery bills but none of these costs are fixed costs so every month costs can change. For example what happens when a roommate decides to move out, suddenly the rent has dramatically increased. And let’s not even talk about the cost of furnishing an apartment even with used items.
So if your child desperately wants to live off campus, pay their salary based on on-campus housing and dining costs. They should be responsible for coming up with the difference by getting a part-time job. And if their grades would suffer with a part-time job then living off campus would also harm their grades.
Transportation Costs
Will your child take a car with them to college? If so, get ready to pay. And the more urban the college location is, the higher the costs and the more reason NOT to take a car. Parking permits at colleges can cost hundreds of dollars a year and gas and insurance costs more in urban locations too. So why pay all that when you can take advantage of both public transportation as well as free college shuttles that transport students around local shopping and dining areas. And if there is an occasional need for a car the majority of colleges now have Zipcars you can rent by the hour.
Send all bills home
The mailing address for all bills should be the parent’s address no matter who is paying the bill. You want to monitor the bills to make sure they are getting paid. The student can sign up for online access to view and pay the bill online. Otherwise students end up having bills lost or forgotten in their college post office box, address from last year or who knows where.
Don’t forget about fun
Make sure their salary includes some fun money too. College students will eat out and go to parties and the best way to keep it under control is to give them a firm monthly budget for that. Let them that amount is firm and they should learn to plan and save funds for months when their entertainment expenses might be higher such as homecoming or spring break.
