Sunday, August 22, 2010

Honey-Do List for Financial Security Before Starting A Family

After five nights in the hospital, my husband and I bring home our first baby. We had dreamed of this day for the past couple years and had done lots of preparation and planning to get to this point. Much of the preparation included our finances, because as everyone knows and everyone warned us- babies are not cheap. Department of Agriculture estimated in 2008 that it cost 220,000 dollars to raise a child from birth to the age of 18, which does not include college tuition! In order to alleviate unneeded financial stress from our daily lives and be able to focus more on enjoying our future family we checked off our to-do list before having our first child:

Clear/Establish credit

In today’s society, you can’t get anything without decent credit. Or in some cases, if you’re lucky, they’ll give you what you want but make you pay up the wazoo for it. After tying the knot, we moved into our first “home” which consisted of expensive rent being flushed down the drain each month, but we lacked the credit to buy. In order to buy a house, we had to take care of my long list of medical bills that had racked up through my college years, thus clearing and establishing my credit.

My husband was learning a tough mistake of co-signing for an ex-girlfriend’s credit card. The fact that he had to file for bankruptcy at the age of twenty-three, and still had a higher credit score than me, was highly disturbing. He still had the black mark on his credit, but he had such great credit established previous to sharing a credit card with his ex that he still had a score in the 600’s with the bankruptcy mark. Credit is the most illogical thing I have encountered. Lesson to learn: NEVER co-sign with anyone on anything unless they are your spouse or child. Just don’t do it.

Set-up Retirement Savings

Once we had cleared my credit report, now we had to patiently sit and wait for my score to increase over time. In the meantime, we set up our retirement savings plan. The easiest place to start is to check out your work place. Many provide retirement options (ie: pensions, 401K’s, financial advisors for money markets and annuities). Find out what your company provides and take advantage of it. Remember to not put your eggs all in one basket. Have a couple different options set up to save for retirement. Then have it directly taken out of your paycheck so that you never even see it. Thakor refers to a simple formula for figuring how much retirement you need stashed away: take your annual income and multiply it by 25 to get a number to shoot for.

Buy a House

Time for all that hard work we did on my credit to pay off. With a decent credit score I can now make it through the strenuous loan application process, as well as get a good interest rate, which will save us substantial money over the long haul. My first word of advice here is to not buy the house of your dreams, but buy a smaller starter house first to gain some equity. Manisha Thakor, writing for, refers to the rule to remember when buying a house and asking yourself if you can afford it: You should not buy a house that is going to cost you more than 3x’s your annual income.

Build General Savings

For all of life’s unexpected quirks, have some funds set aside. We worked on this from day one, but this is a must to always keep an eye on.

Dependable Income

I teach, and being a special education teacher gives me a bit more job security than the rest. I also know there are a couple people below me on the seniority list for special education. After being caught in the unemployment statistics our first year of marriage my husband had found an hourly job at Wesco, one of the few companies who will pay for college. His job brings in some extra cash and is helping him to invest in his future, and did I mention for free?

Health Insurance

Kids get sick- a lot. I don’t have an impressive track record either when I talked about clearing my credit tarnished with unpaid medical bills. Good health insurance makes your paycheck worth that much more. There are many people out there who cannot get good insurance, and if that is the case at least have a plan (medical fund built up, Care Credit, payment plans, etc).
Once we had our to-do list checked off, enter baby. We had been patiently waiting to get our list completed, and were quite proud with ourselves that we had covered it in two years. Granted, we had a bit of a head start on things before meeting each other. But we wanted our family to be settled on a firm foundation. My husband and I both came from families where we saw our parents struggle from poor money management, which makes for a stressful marriage, feelings of guilt, and missed opportunities. We recognized these errors in our families and learned how to be financially responsible once we were out on our own. A couple times we had to learn the hard way, from mistakes, but one couldn’t ask for a better teacher than experience.

I look at my son as he lays sleeping in his bouncy chair. I want him to pursue everything he wants in life- travel, jump at opportunities that arise, take up a new sport or hobby, on top of learning the ethic of hard work and frugalness. Being financially stable provides much more flexibility and freedom to help these things happen.

Maybe someday he wants to be a neurosurgeon, a software programmer, or a teacher. Wait a minute- time to start a new honey-do list: Saving For College. The clock is ticking. But because we had gone through our to-do list for financial security before starting a family, we are now in a great position to start that college savings from the day he is born. I can’t think of a better gift to give my child- the assurance of higher education. As Edward Everett said, “Education is a better safeguard of liberty than a standing army.”

Have you passed the lessons of a personal financial hardship on to your children? Share your story with our readers.

Did you know can help you save more for college? Every dollar counts!

Saturday, August 21, 2010

Options for College Savings

I, like all other new parents, are a little overwhelmed when thinking of saving for college. Where do you start? What ways do I get the most interest? What are the benefits to certain programs? There are tax breaks out there too? Or maybe your kids are around the age of 9 or 10 and you’re halfway to the college milestone. You have been saving this whole time but haven’t looked at other options that may give you better benefits. Keep in mind the rule of 6% inflation each year. Here are your options when it comes to saving for college:

Number one recommendation for long-term savings: 529 Plans.

Each state has one, and you can shop around not having to reside in the state that holds your plan. Each state has a different plan, so you can pick one that has benefits you are more likely to use. The account owner can request withdrawal at anytime (subject to tax and a 10% penalty on earnings). 529’s also allow for third parties, such as grandparents to directly contribute. Many rewards programs are out there that give you free money based on your expenditures, and deposit that directly into your 529 Plan. Check out rewards such as Upromise, Futuretrust, and Fidelity 529 Rewards American Express Card which gives you 2% rebate on your purchases. Also note that 529 Plans are tax deferred.

Traditional Savings Accounts

Shop around, interest rates have dropped dramatically the past couple years. Often a savings account interest does not keep up with inflation. The upside is always having access to your cash.


Often times they earn more interest rate than a traditional savings account and have little to no risk as a savings. You just have to commit your money for so many years. Word of warning: be careful that taxes don’t eat up your interest rate in the end.

Stock Market

Best payout for interest if you are starting savings early, but many experts recommend switching to a less aggressive plan in the couple years approaching the college milestone. Cash out stocks and put them into bonds or a 529.

Savings Bonds

The U.S. Treasury recently announced new interest rates, and don’t forget that they compound yearly. For the Series I (one year commitment, renews automatically each year, collecting compound interest) interest is at 1.74%, and the Series EE is earning 1.44% (18 year commitment).

Mutual Funds (including money markets, stocks, bonds)

These are different than individual stocks, a portfolio of an assortment of bonds is put together to take advantage of the overall stock market with lower risk. However, your principal is not insured. Assets should be moved out of mutual funds and into a safer route when the time comes close to having to put that money to work paying for college.

The bottom line is to start saving early, with an aggressive plan. There is more risk, but also can be more gain. During your students’ high school career, switch your funds out of risky accounts and put them somewhere your money principal is guaranteed (savings, CD’s, 529 Plan). Consult a financial advisor to best advise you.

Are you saving for college with a 529 or using something else? Share your choice with our readers.

Did you know can help you save more for college? Every dollar counts!

Friday, August 20, 2010

When Cracking Open the College Savings - Get the Most Bang for Your Buck

Growing Job Fields

Yes, support Johnny in his aspirations when selecting a course of study, but also guide him in doing some research in his selected field. Find out what career choice he hopes to pursue with this degree, as well as some estimates of the average annual salary that comes with his career choice ( recommends a guideline of not taking out more student loans than your estimated annual salary after college). Is he ok with relocating if his field is more successful in certain locations, and is this career estimated to grow with society’s developing changes? These are tough questions to look at, but Johnny needs to look at these reality checks.

With being only four years out of college myself, I cannot tell you the number of my fellow classmates I saw graduate with a degree and not have a clue of what they were going to do with it. Nor did they look at statistics beforehand to see how well the field is growing, and now can’t get a job. If you’re not going to use your degree it is a waste of money and time flushed down the toilet. These are the people who complain they can’t get a job with a college degree. Know your statistics and do your research.

Packing up your student for dorm life in the next couple years? Money towards education would go the furthest if your student went into any of these following job fields that are just now taking off or are projected to be booming in the next few years. Your student would graduate with great odds of landing a job fresh out of college and would be making bucks that will make up for the time and money spent during those four years of college. analyzed data from the U.S. Department of Labor’s projection of job growth, and came up with the results of these growing job fields:
  • Science and Technology (field with the highest growth- a whopping 72%): meteorologist, computer software engineer, network architect, security system installers, plumbers.
  • Business and Finance: financial advisor (for everyday people) and financial analysts (for banks and companies), cost estimator for companies, and logisticians to manage supply chains.
  • Arts: technical writers, curators, film and video editors.
  • Medical: registered nurse, veterinarian, medical and public health social worker and jobs requiring less schooling such as x-tray technician, lab technician, and physical therapy assistant.
  • Civic Service: Urban planning, firefighting, special education teachers.

CBS news interviewed Dr. Laurence Shatkin Ph.D., who also analyzed the U.S. Department of Labor statistics, and his projections gave the following occupations as the top five for growth:

  1. Home Health Aides and Personal and Home Care Aides.
  2. Computer Networking, Systems, and Database Administrators.
  3. Registered Nurses
  4. Medical Assistants
  5. Accountants and Auditors

One last note- once your student has selected a field that there is a future in, research schools with solid programs pertaining to it. Some employers give preference to a degree from certain schools, or look down upon others. Some careers have two year programs that will get your foot in the door. Talk to people in the field to find out what employers are looking for and compare programs. Keep in mind: The shortest route may save you time and money- but will it get the job? As well as food for thought: An ivy league school is not a requirement for a job that will not pay off the student loans.

Share your thoughts: Are you encouraging your child to look at specific careers?

Did you know can help you save more for college? Every dollar counts!

Thursday, August 19, 2010

Where To Start When Thinking Of College Savings

The Bureau of Labor reported for the month of July that unemployment remained unchanged at 9.5%. The long term unemployment ranks (jobless for more than 27 weeks) remained unchanged at 6.6 million. Many of the people were blue color jobs, factory workers, and hands on workers such as the tool and die trade, where machines are taking over previous jobs completed by a person. With those kinds of statistics out there, the bottom line is you have to have a degree to compete. When the economy hit bottom, my husband was one of those unemployed for over a year. He had numerous trades he knew, one of them being high level computer skills such as networking, repair, programming, you name it. He applied for many jobs that required his specialized knowledge, and he had plenty of experience that could vouch for his skills. However they didn’t even give him the time of day without the piece of paper from a university or college to back it up. Higher education is a must in today’s job world.

I didn’t get assistance from my parents for tuition, why should I take out of my retirement to pay for college?

With your financial assistance and support, your student can be out of school that much quicker and into the job market. In a job they are bringing money in to pay off student loans instead of hanging in limbo, halfway through a degree, and their fourth year of school approaching. In today’s economy you can’t count on students working to help fund college. The Bureau of Labor reported that the highest unemployed population was teenage, coming in at 26.1%. Who’s going to take a chance on a teenaged employee, when you can hire a middle aged, more reliable, employee who would be thankful for a minimum wage job. The bottom line is if you start saving early you can make a significant difference in your child completing college. You don’t have to pay for every penny of tuition- there are grants, scholarships, and Financial Aid that will assist with some cost. However, whatever you can save, and as early as possible will make it that much more likely that your student walks away with their completed degree.

Step 1: Look at average tuition costs.

According to the College Board, which is a nonprofit group made up of hundreds of higher education schools around the nation, here’s a look at averages tuition rates right now:

  • Four year university, in state: $19,388
  • Four year university, out of state: $30,916
  • Private four year university, in state: around $38,000
  • Two year schools: $14, 285

Did I mention that those figures are annually? So multiply accordingly on however many years it will take your student to finish school.

Step 2: Figure in inflation.

If you’re like me, and starting early you are looking at 18 years of savings yet. In that case, if you still have a few years before your child leaves the nest factor in inflation rates as well. The website has a calculator on their website that will help you determine a number to shoot for by factoring in today’s average tuition, an inflation rate (they recommend 5%), years of saving that you have, expected years of attendance and the percent of the college costs that you plan to use your savings on. Start early and you have compounded interest to contribute to your end amount.

Step 3: Decide how to save.

There are many different ways to save for college. There are ways to invest, savings, and special education savings plans, as well as tax breaks. Stay tuned for the next blog which will go more in depth on your options.

Share your thoughts: What's your biggest concern for your child's future?

Did you know can help you save more for college? Every dollar counts!

Wednesday, August 18, 2010

What is a 529?

Upon hearing the news that my husband and I are expecting our first child, numerous people have advised us that we should set up a 529 Plan in order to start saving for college NOW. Unbeknownst to any of them, our child is going to be a prodigy, on multiple levels. Not only will he/she be such a genius of epic proportions that the Ivy Leagues will be throwing full ride scholarships plus living expenses his/her way by age 10, but he/she will also be heavily scouted for numerous athletic scholarships, in a variety of sports. However, just in case that doesn’t happen, it is best that we are prepared to fund our child’s education.

I vividly recall, at 5 years old, riding my bike to the bank with my dad, a backpack full of my hard earned piggy bank change in tow. I sat on the counter and watched in awe as my coins were counted in the wondrous machine and then opened my very first savings account. My dad said that the money I saved would go towards college. Since that moment, I knew that I would do the same for my child one day. However this 529 plan sounds much more complicated than a traditional savings account. What is it exactly? Is it a magical machine that will transform my change into enough money to fund the sky-rocketing tuition costs?

Unfortunately, no such phenomenon has yet been discovered. However, the 529 sure does sound like a great option! A 529, also known as a qualified tuition plan, is a state-sponsored investment program developed in 1997 in order to help families save for college. Offering flexibility, control, options, minimal restrictions, and tax advantages, a 529 plan is a great way to save money to apply towards tuition, room and board, mandatory fees, books, and computers. The myriad of advantages of a 529 plan include:

Tax Benefits
Unlike other investment options, 529 earnings do not incur income or capital gains tax.
  • Federal: 529 plans grow tax free, thus you pay no federal tax on earnings
  • State: State tax benefits vary by state. Many states offer a tax deduction, so check this out when choosing your plan.
  • Gift Tax: Under the 529 plan, you can contribute up to 65K in a 4-year period, which is five times the normal 13K per year per student, without incurring gift taxes.
Withdrawals are tax free as long as they are used for qualified higher education expenses (tuition, room and board, mandatory fees, books, and computers).

High Contribution Limits
Limits are as high as 320K in some states.

Low Initial Investment
You can often start a 529 Savings Plan for as little as $25.

Financial Aid Eligibility
No more than 5.64% of savings from a 529 plan can be counted as income towards financial aid eligibility. This is far lower than what they include for traditional savings accounts or other types of investments.

School Choice
A 529 Plan does not tie your child to certain schools or locations, unlike traditional educational savings plans.

Investment Options
There are many plans to choose from and many investment options within those plans. Popular options include age-based plans and pre-paid plans.

Multiple Plans
You can have more than one 529 plan per child. This enables relatives to set up additional savings plans for your child!

Investment Flexibility
You can invest in any state’s plan, no matter where you live.

Beneficiary Adjustability
If your child gets a scholarship or doesn’t go to college, you can transfer savings to a different beneficiary or use them for yourself.

Even though there is no magical tool, and 529 plans do carry risk like any other investment, the flexibility, options, and tax benefits make this a very worthwhile college financing option. This option will still allow me to teach my child to put his/her earnings towards college, and it also provides alternatives if in fact he/she does earn a full ride.

Have you chosen a 529 for your child? Share your choice with our readers. Did you know can help you save more for college? Every bit helps!

Tuesday, August 17, 2010

Where did the time go?! Short-term strategies to fund college.

Those 18 years flew by, and perhaps you had the great intentions but just didn’t quite get enough money saved to cover your student’s tuition. Lost some bucks on the stock market? Maybe having to sit in one more parent-teacher conference, regarding Johnny’s motivation to turn assignments in drove you to the breaking point and your nerves needed that vacation to Cancun. Regardless of the situation, life happens, even with the best laid plans. Here are some tips for saving college tuition, when shipping your darling off to the dorms is just around the corner.

Be careful with UGMA and UTMA (Uniform Gift to Minors Act and Uniform Transfers to Money Act). Joseph Hurley, founder of, warns that these accounts weigh heavily when qualifying for financial aid. Before filling out FASFA forms, transfer these accounts to 529’s.

Urge your student to sign up to be a Resident Assistant: Free board and meals.

529 Plans are not strictly for long term use. Check out the different plans and benefits to short term use.

Search for and apply to scholarships early. If you search the internet you will come across scholarships for merely being left-handed. Kid you not. Have your student search scholarships for up to a year in advance. If your student lacks motivation, you can find the scholarships for them and start an ongoing file that they can gradually work on throughout senior year. Also, study up for the ACT’s and SAT’s to get a little extra scholarship money.

Get used college books. Again, there are tons of websites out there, including where you can buy the book for a fraction of the cost. If you have to buy a couple new, these sites will also give you cash to buy books back when the class has been completed.

Have your student apply for an Independent Study where they can get a job on campus. Put the application in early, because many students put in and there are limited positions. It saves job hunting, job is conveniently located on campus for those who don’t take a vehicle to college, and some of the jobs are pretty laid back allowing for schoolwork to be done on the clock when things are slow.

Research loan forgiveness and repayment programs. Loans are actually wiped out after college or so many years in the profession. Read carefully to make sure the stipulations are followed. There are programs in education, health, law, and volunteer programs such as Peace Corps and AmeriCorps.

If your student is able to handle it, have them take some college courses as dual enrollment during high school. They will have college credits racked up before they even graduate high school, making for a nice chunk of cash saved.

How are you helping your child prepare for the financial side of college life? Share your story with our readers. Did you know can help you add just a little bit more to your college fund? It's never too late to save towards less student loan debt!

Monday, August 16, 2010

How to use Coupons to Save Money

According to online calculators, solely based on the fact that my child is not yet born, projected total cost for college is $312,000, or a monthly savings of $602! Depending on whether your child goes to a public state school or an Ivy League college, monthly savings for a newborn fall anywhere in the range of $400-$1200. If your child is already sixteen, those monthly goals increase to between $1200-$3500. Excuse me? So on top of paying my mortgage, household bills, feeding a retirement account and day- to- day living expenses, I now have to figure out a way to sock away an extra $600 per month for college? There’s no way!

Never say never, my friend. Please take the same advice I offered myself… don’t panic! While these amounts certainly seem daunting, let’s change our perspective and see them as a challenge instead. It’s just a simple mindset change. As my wise, level-headed husband says, our goal is to at least give our child a head start. So I propose a new mantra for us all to follow and an invitation to take on the challenge of finding creative ways to add money to the college fund. The mantra is this: Every Little Bit Helps.

One interesting way that I’ve been saving money that I never thought I would utilize is couponing. Couponing has surprisingly become quite fashionable these days! You can make it as simple or complex as you want and go about it in many different ways. There are myriad websites that basically do all of the leg work for you (some of my favorites are,, and They list where and when to find the best deals and many even provide links to on-line coupons so you don’t have to clip inserts from the Sunday paper. Everybody will offer a different strategy- clipping vs. not-clipping, organizational systems, etc.

After experimenting with this phenomenon for quite some time, I’ve finally found what works for me. Basically, the keys to really saving money with coupons are:

  • Waiting for the sale - Stores know when coupons first come out. They bank on the fact that people will use them right away, therefore items are full price. If you wait a few weeks, the items eventually go on sale and then you get much more bang for your buck.
  • Stacking - Many stores allow you to stack a manufacturer’s coupon with a store coupon. For example, you can use a Target coupon for $1.00 off an item and a manufacturer’s coupon for an additional $1 off that same item.
  • Stocking Up - When you are able to get a great deal on an item, stock up! There is nothing wrong with having extra toilet paper on reserve!
  • Buying what you need - Many coupon sites actually argue the merit of buying things you don’t need in order to save on other items. (You can donate the items you don’t need.) However, I personally find it more worthwhile just to buy what I need and will actually use. Store
  • Rewards/Incentives - In addition to savings, many stores offer rewards and cash back incentives that you can use at a later date. For example, if you buy an item at Walgreens that offers Register Rewards, in addition to the savings you get with your coupon, you will also earn extra money to use towards a future purchase. If you keep it rolling correctly you could end up with some good freebies.

Before you dismiss this idea, consider my couponing item of choice: cereal. Cereal, on average costs $3.50 a box. Well, now, thanks to couponing, I don’t spend over $1.50 for a box of cereal. Sometimes I even get it for free! Now, consider how something as insignificant as breakfast food can impact my child’s college fund:

Let’s say the average family goes through 10 boxes of cereal per month. If purchased at full price, this would be a monthly bill of $35. With coupons, the total cost would be $15 at most. That is a $20 monthly savings, or an annual savings of $240. Invested wisely, at an average return rate of 5% over the next 18 years, savings yield will be $7033.14. Now that’s nothing to scoff at!

Sure, it would be wonderful to completely cover college for our children. Ideally we all will reach those lofty monthly targets one day. However, every little bit helps and by doing something as simple as using coupons to save on everyday household purchases, the savings will continue to blossom.

Now consider the many items you use regularly that could add up to decent “extra free money” through couponing (toothpaste, toilet paper, shampoo, pasta sauce, diapers, tissues, soap, cleaning items, etc. ). The savings can really add up! Keep the ideas coming, be creative, and you may even reach your goal after all!

Where do you look for college savings? Share your tips with our readers. Did you know can help you save more for college? Every bit helps!

Friday, August 13, 2010

What is an Age-Based 529 Plan?

You’ve made the important decision to set up a 529 plan for your child. The hard part is over, right? Well, not quite. One of the advantages to 529 plans is that there are many investment options available to you. However, for many this may not seem like such a positive when investing is a little frightening, uncertain, foreign, or just plain overwhelming. The good news is that you can set up your 529 plan in ways that give you as much or as little involvement as you desire, always with the flexibility to make changes as you see fit. One popular type of plan that suits the needs of all types of investors is an age-based option.

Age-based plans function similarly to a 401K retirement account. Just as retirement accounts are set up to maximize risk and earnings earlier and taper to safer investments as you near retirement, age-based 529s follow the same premise leading up to college age. The risk is greater the younger the child, and as the child nears college age the funds are more securely distributed.

Age-based options are set up so that your money is dispersed in different ways depending on your child’s age. If your child is between the ages of 0-5 you have quite a bit of time to let your money do the work for you. The younger the child, the more the investment emphasis is placed on stocks because there is time for short-term fluctuations and long-term growth potential. As college grows closer money is transitioned into more bonds and secure savings in order to ensure adequate funds when you need them. Even though it’s best to start saving as early as possible, it’s never too late. Even if your child is in high school, you can still reap the tax advantages and investment potential of a 529 plan. Your investments will start off more conservatively since you will need the money soon.

In addition to your child’s age, another factor that plays a key role in deciding upon the right plan for you is your level of risk tolerance. As with any investment tool, the more risk, the greater chance for reward (or loss). If the thought of losing money terrifies you, take a more conservative approach in which at least half of your money is more securely invested in bonds as opposed to a far more aggressive approach in which funds are invested in more volatile stocks. Or perhaps you are feeling adventurous, but also want to ensure some stability. Yet another advantage of 529 plans is that you can set up more than one account for your child. You may want to try one conservative and one aggressive plan in the hopes of off-setting any major losses.

Keep in mind that once you choose a plan you are not locked in. Once you decide on your risk tolerance, there is still a lot of flexibility within each category. You can create your own age-based plan by picking your own stocks, bonds, and reserves within your portfolio, or you can pick a managed fund that does the work for you. You can always change your plan to be more or less aggressive or move funds around to suit your needs.

Remember, these types of plans are designed for long-term investing. In a bear market, it is not always advisable to pull money out if you still have plenty of time for it to recover. If your money takes a downturn and your child is more than 10 years away from college, it is generally okay to leave it alone and ride it out. Chances are the market will recover in that time. Alternately, if your child is nearing college age and you will need the funds soon, it is advisable to move money to more secure funds.

Below is an example of an age-based plan adapted from the Vanguard 529 Plan Age-Based Option. It illustrates how money is allocated depending on the child’s age and your risk tolerance. All of them start out more aggressive earlier and become safer as college approaches.

Best of luck on the next step of your investment adventure!

Are you happy in an age-based 529? Made the switch to something else? Let our readers know! And check out for an easy way to increase your 529 savings.