| Life is a constant juggling act. Every day we juggle | | | | future tomorrow. |
| tasks, time, people and goals. This is especially true | | | | Get the Kids Involved |
| when it comes to balancing financial goals, whereby | | | | Parents should be straightforward with their children |
| time is not the scarce resource, but money is. The | | | | about how much they will be able to afford. If the |
| future can seem especially daunting for young | | | | child wants to go to a "name-brand" school that |
| families balancing retirement funding goals and college | | | | costs $35,000 a year, but the parents can only |
| planning for their children. When a dollar can only | | | | afford $15,000 a year, the student can take part in |
| stretch so far, how can you effectively plan for | | | | the choice to find alternative financing or go to the |
| both? | | | | more cost effective school. Remind them that if |
| Advanced education is vital, but it comes at a cost. | | | | mommy and daddy don't have enough money in |
| Short of saving for retirement or buying your dream | | | | retirement, because they spent all their money on |
| home, no other expense has that great an impact on | | | | college funding, they should get used to the idea of |
| the family finances. College costs increase at about | | | | having them as roommates to support when they're |
| twice the inflation rate. Current increases have | | | | all grown up. So, run the numbers together to see |
| averaged 5% to 8%. In fact, it is estimated that by | | | | which universities your family can afford. Compare |
| 2020, a four year college education could be as much | | | | the costs of attending public vs. private institutions |
| as $287,000 at a private institution and $133,000 at a | | | | and consider the possibilities for financial aid. |
| public one, based on College Board estimates. Ouch. | | | | The federal government has made it possible for |
| But, are youreally prepared to sacrifice your own | | | | virtually anyone to attend college, despite cost and |
| financial security during retirement for your child's | | | | despite parent's income. Student loans and parent |
| education? | | | | loans are readily available at low interest rates and |
| As expensive as it is to send junior to college, | | | | payments are often deferred until the student |
| retirement is even costlier. Sadly, nearly half of | | | | graduates (for most full time students). Too many |
| American households are not saving at all; and two | | | | families incorrectly assume that they won't qualify |
| thirds are not saving enough to retire adequately. | | | | because they feel they are too wealthy, but this is |
| Couple that challenge with a desire to fund your | | | | not the case. The application process may be |
| child's education and you may have a serious | | | | somewhat cumbersome, but the benefits far |
| economic dilemma on your hands. | | | | outweigh the (time) costs. |
| Paying for School | | | | The best financial aid, of course, is free money. Much |
| College expenses are traditionally paid from one of | | | | of the student financial aid comes in the form of |
| several sources: parent's current income, financialaid | | | | loans, but there are grants and scholarships readily |
| scholarships/grants, and parent's personal savings. | | | | available for that patient enough to search for them, |
| Over the past several years, however, a proliferation | | | | and qualify for them. Check out The College Board |
| of college savings programs have been introduced | | | | for more information about college costs, scholarship |
| including prepaid tuition programs, including: | | | | search strategies and financial aid. |
| Coverdell Education Savings Accounts | | | | Working While Studying |
| Formerly called Education IRAs, a Coverdell ESA | | | | Parents who wish to only partially subsidize education |
| allows you to put $2,000 away each year per child (if | | | | for their kids (or not fund it at all) have a number of |
| eligible), and you can usually invest the money | | | | alternatives. Students can apply for loans, work-study |
| however you like. Distributions are tax-free when | | | | or (gasp) get a job. Asking a college student to work |
| used for qualified elementary and secondary | | | | and/or take out loans may not seem attractive now |
| education, as well as qualified college education | | | | (especially for the student). But, there is something |
| expenses. | | | | to be said about a child that works his way through |
| Prepaid Tuition Programs | | | | school. They're often hungrier, eager and motivated |
| Prepaid tuition plans are college savings plans that are | | | | to succeed. Those traits can take you far in life. In |
| guaranteed to increase in value at the same rate as | | | | fact, some of the best and brightest professionals |
| college tuition. The main benefit of these plans is that | | | | have managed to do well in school while also |
| they allow a student's parents to lock in tuition at | | | | managing a job, presentcompany included. After all, |
| current rates. While the state plans vary, if the | | | | the kids can get student loans to fund education, but |
| student attends an in-state public college, the plan | | | | when is the last time you heard of retirees taking |
| pays the tuition and required fees. If the student | | | | loans to fund their retirement? |
| decides to attend a private or out-of-state college, | | | | Consider a Whole-Portfolio Approach to Investing |
| the plans typically pay the average of in-state public | | | | Don't want to bother compartmentalizing your "pots |
| college tuition. | | | | of money"? No problem. Many of my clients have |
| 529 College Savings Plans | | | | opted for a more holistic planning approach. A |
| These plans are a popular choice because they offer | | | | whole-portfolio approach takes into account all of |
| the account owner control andflexibility, combined | | | | your taxable and tax favored investment accounts. |
| with special income tax and estate benefits. Section | | | | With this approach, you can always earmark certain |
| 529 college savings plans are tax-exempt college | | | | buckets of your portfolio for certain things. But |
| savings vehicles with a low impact on need-based | | | | putting it all together in one portfolio provides a |
| financial aid eligibility. Unlike prepaid tuition plans, there | | | | big-picture view of your overall asset allocation. That |
| is no lock on tuition rates and no guarantee. | | | | way you can manage your total portfolio risk at any |
| Investments are subject to market conditions, and | | | | given time. |
| the savings may not be sufficient to cover all college | | | | This approach allows you to incorporate your various |
| costs. However, with this added risk comes to | | | | goals, including college and retirement, into the big |
| opportunity for potentially earning greater returns. | | | | picture as you plan for future spending needs. You |
| Today, there are many choices available for parents, | | | | may find that the financial pie is actually big enough |
| but the most important consideration in planning for | | | | for both, or you may need to adjust one goal or |
| college or retirement is to start saving as early as | | | | another. |
| possible. The earlier you start to save, the lower the | | | | Closing |
| regular contributions will have to be. It's never too | | | | So, which one is it-college or retirement? Ideally, you |
| late, or too early to start. | | | | don't want to sacrifice one goal for the other. Try to |
| Set Priorities | | | | balance the two so you don't shortchange your |
| It's not easy to be a disciplined saver, but there is no | | | | future or your children's in the process. The decision |
| way to survive this funding conundrum without it. In | | | | to put your child's education before your own |
| an age where instant gratification is a way of life, it's | | | | retirement is not only an economic decision, but also, |
| tempting to spend today and worry tomorrow. | | | | an emotional one. Parents feel a sense ofobligation to |
| Spend less and save more, while unpopular advice, is | | | | provide a better way of life for their kids, but if they |
| necessary advice. The alternative will get you | | | | plan carefully, they won't have to risk their own well |
| nowhere. So, setting and maintaining a budget will be | | | | beingin order to accomplish this. |
| critical to your success. It's nice to spoil our children, | | | | The consequences of funding education before |
| but do they really need fifty-seven Xbox games in | | | | funding retirement may lead to inadequate retirement |
| their collection? Is that trip to Disney really necessary | | | | funds orprolonging your work years. The choice is |
| every year? Sacrifice today will help assure a better | | | | yours, so choose wisely. |