Monthly Archives: July 2016

4 Keys to Saving for College

4 Keys to Saving for College

Are you kidding me?

  • Pay for college OR get married?
  • Pay for college OR buy a house?
  • Pay for college OR save for the future?

These are actual choices forced on significant numbers of Americans these days.

A college education is VERY expensive!

Today’s American college graduates carry a combined student loan debt of nearly $1.3 trillion. The average graduate has $37,172 in student loan debt, up 6% from last year.

Combine that with many graduate starting salaries in the low $30k’s, and you have a prescription for long-term financial pain. In a recent Salary.com survey, 31% of respondents said they “regret taking out student loans and wouldn’t do it, if they could go back in time.”

So, let’s focus on having to borrow ZERO? That requires saving ahead and planning ahead.

NOTE: THIS POST IS AN EXCERPT FROM OUR FREE “HOW TO PAY FOR COLLEGE” TRAINING, THAT INCLUDES A 38-MINUTE TRAINING VIDEO, THE TRAINING SLIDES, AND AN EXHAUSTIVE “COLLEGE FUNDING CHECKLIST.” JUST CLICK HERE TO GET THE FREE TRAINING.

1 – How Early Should You Start?

Conception!

Do Not Disturb

OK…perhaps that’s a slight exaggeration, but not by much. If you could start saving for a child’s college education at the time of their birth, you and they would be happy campers when they’re a high school senior.

For many people, their student loan debt is a reflection of how long they (and their parents) waited to start thinking about paying for college.

I don’t want this to be the case for your child, grandchild, or yourself, if you’re the student.

But it’s not just about saving. It’s about maximizing all available resources, including grants and scholarships. Believe it or not, saving the wrong way can actually hurt your student’s ability to maximize these free money sources for college.

So, let’s chart a course through the college funding minefield to see if we can get your student to freshman year with the most money.

But before we do that, let me toss you a live hand grenade!

 

4.0

 

2 – Your Retirement Comes First

It sounds like blasphemy in our “You owe your kids a college education” culture. But it’s true. Your child or grandchild will have options to pay for college. You will not have options to pay for your post-employment living expenses once you reach that age.

Move in with kids

Unless you want to burden the same child with having to take you in when you’re old and unable to work, you’d better plan to have resources available at that time to take care of your own expenses.

How can you manage both college and retirement savings? Refer to “How Early Should You Start?” above.

Because TIME matters.

3 – Here’s the Wealth Building Equation

Contribution amount  X  rate of return  X  time.

$ x % x Clock

If you reduce any of these values, and you want the same outcome amount, you have to raise one or both of the other values to compensate.

For example, if you start saving later in life, you are reducing the time value. So, to end up with the same resulting dollar amount, you’ll have to either contribute more each month/quarter/year or find a higher rate of return.

Unfortunately, most people choose the latter.

This is called “Chasing return,” and it’s the fool’s pursuit of many a doomed saver. With increased “promised” rate of return comes increased risk of capital loss (the money you put in).

The practical reality is that, the later you wait to start, the more you’re going to have to contribute to end up with same outcome.

What this also says is that, if you’ve waited too long, you may have to choose between saving for your student’s education OR for your retirement. Because, based on what you can afford to contribute, you may only be able to fund ONE of these outcomes. And as I said earlier, choose YOU.

 

NOTE: THIS POST IS AN EXCERPT FROM OUR FREE “HOW TO PAY FOR COLLEGE” TRAINING, THAT INCLUDES A 38-MINUTE TRAINING VIDEO, THE TRAINING SLIDES, AND AN EXHAUSTIVE “COLLEGE FUNDING CHECKLIST.” JUST CLICK HERE TO GET THE FREE TRAINING.

 

4 – It Matters Where You Save

Assuming you and your student can save ahead of time, where do you stash the money?

Introducing the FAFSA form. The Free Application for Federal Student Aid (it’s so nice that you don’t have to pay to fill out the application). This form is used to determine the Expected Family Contribution (EFC), which determines eligibility for need-based financial aid.

You’ll provide student financial information, family size and the number of family members enrolled in college as well as the student’s age, marital status and other demographic characteristics that will be used to determine whether the applicant is an independent student or dependent.

If a student is dependent, parent information will also be required on the form.

The child’s assets count for more. Colleges will expect families to use up to 20% of dependent-student-owned assets to pay for college. This is true even if the child’s assets are funded by other people’s money.

The parents’ assets count for less. Colleges will expect parents to use up to 5.64% of their “unprotected” assets toward college. A 529 account owned by a student is counted as a parent’s asset.

A portion of the parent’s assets is protected. “Protected” assets are not counted at all. The exact amount protected depends on the number of parents and the age of the older parent.

PFB graphic

This is one of the areas where our Private Family Bank shines. NONE of the money in your Private Family Bank need be reported on the FAFSA form, so it will not reduce the amount of financial aid available to your student.

Want to Know More About Funding College?

We created a fact-packed 38-minute training that we’d love to give you for FREE. It’s cleverly titled, “How to Pay for College. You get the video training, plus you can download the slides, so you’ll have all the details and information source URLs we mention in the training. We also include a very comprehensive “Saving For College Checklist.” It raises issues you can be addressing as early as elementary school.

Is a college education expensive? You bet your latest selfie it is!

So we want to help you not wreck your financial future to pay for your, or a child’s, education. Check out the free training. It’s our random act of love gift for you. <3