529 savings account http://www.wisebread.com/taxonomy/term/11664/all en-US 3 Reasons Not to Save for Your Child's College Fund http://www.wisebread.com/3-reasons-not-to-save-for-your-childs-college-fund <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/3-reasons-not-to-save-for-your-childs-college-fund" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/7509475092_063e763f2e_z.jpg" alt="graduation" title="graduation" class="imagecache imagecache-250w" width="250" height="167" /></a> </div> </div> </div> <p>Since I had my son, I have often heard from family and friends that college is going to be extremely expensive, and it is best to start saving now. After much research I decided that I wouldn't put too much into a college fund. This may be against the usual advice of saving for the future, but here are some sane reasons why parents should not pump too much money into their children's college funds. (See also: <a href="http://www.wisebread.com/college/saving-for-college">How to&nbsp;Save Money for College</a>)</p> <h3>1. A Large College Fund Can Lower Financial Aid</h3> <p>This is mostly due to how financial aid offices calculate need. Most public schools use the FAFSA, and many private schools use a combination of the CSS/PROFILE and their own formula. Regardless of the method used, generally parents and students have to list their assets, and more savings means less need. So it is actually possible for two families with equal incomes to receive different amounts of financial aid, and the family with less savings would receive more. Retirement accounts are usually excluded from these calculations, so it is to the parents' advantage to sock away more for retirement rather than a child's college fund. The calculations also usually count a student's assets fully, so if you put a college fund under your child's name, then that would hurt your financial aid numbers as well.&nbsp;</p> <h3>2.&nbsp;Working During College Can Be Beneficial for Students</h3> <p><a href="http://www.bls.gov/osmr/pdf/ec080020.pdf">Research from the U.S. Department of Labor</a> (PDF) showed that young adults who had to work and pay for at least part of their college actually did better in school than those who did not have to work. This is not that surprising since the kids that had to work and study at the same time are more invested in their education and are generally more disciplined to be able to manage work and school. Those who had to work probably valued their education more than those who didn't. Additionally, these students who had work experience usually fare better after they graduate in their job searches because any job experience is better than none in the eyes of employers.</p> <h3>3.&nbsp;College&nbsp;Isn't the Right Choice for Everyone</h3> <p>There are currently many college graduates with no marketable skills who are not doing better than those who pursued an apprenticeship in a trade. If parents put away a lot of money in a college fund like a <a href="http://www.wisebread.com/college/section-529-plans">529 plan</a> and later find that their children no longer wanted to go to college, then they would have to take a <a href="http://www.wisebread.com/tax-penalties-for-early-retirement-withdrawals">tax penalty</a> to take the money out for other uses. I think it is best to wait and see what a child's pursuits and talents are before deciding on that college is the best path.</p> <p>My son will be college bound in about 15 years. I don't yet know what he will do, but if he decides to go to college, we will definitely support his decision. For now we are putting in $100 per month into a 529 account. In 15 years it will grow to a significant amount, but it probably will not be enough money for four years of college given the rate of increase in higher education costs. However, we're not that worried about it because ultimately I think that young adults should start taking responsibility and shoulder at least some of the costs of college. I think the whole point of raising and educating children is so that they can be independent and survive on their own, and it would be good for my child to learn that as soon as he is able.</p> <p><em> What do you think? Are you currently saving a lot for your children's future college costs?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/xin-lu">Xin Lu</a> of <a href="http://www.wisebread.com/3-reasons-not-to-save-for-your-childs-college-fund">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-7"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-help-your-adult-children-become-financially-independent">How to Help Your Adult Children Become Financially Independent</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-things-you-should-make-your-adult-child-pay-for">4 Things You Should Make Your Adult Child Pay For</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-financial-skills-to-master-before-you-graduate">6 Financial Skills to Master Before You Graduate</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-money-fights-married-couples-have-and-how-to-avoid-them">4 Money Fights Married Couples Have (And How to Avoid Them)</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-signs-youre-financially-ready-to-start-a-family">7 Signs You&#039;re Financially Ready to Start a Family</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Education & Training Family 529 savings account college fund training Mon, 09 Jul 2012 09:49:59 +0000 Xin Lu 939434 at http://www.wisebread.com Are You Saving For Your Child's College Education? http://www.wisebread.com/are-you-saving-for-your-childs-college-education <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/are-you-saving-for-your-childs-college-education" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/college-education.jpg" alt="paying for college" title="saving for college" class="imagecache imagecache-250w" width="250" height="129" /></a> </div> </div> </div> <p>Are you worried about <a href="http://www.thedigeratilife.com/blog/index.php/2009/07/27/savings-account-rates-high-returns/">savings account rates</a> and whether your investments are keeping up with your financial expectations?&nbsp; That perhaps your money isn't stretching far enough to fund some of your future financial goals?&nbsp;&nbsp;&nbsp;Well you're not alone.&nbsp; There is one financial goal in particular, that looms heavily upon those of us with children: <strong>increasing costs tied to the call of higher education and college.&nbsp; </strong></p> <p>Lately, the issue of higher tuition rates has occupied the news; we heard of the disruption that took place at U.C. Berkeley when regents announced rising fees in the horizon.&nbsp; It can't be helped really -- it's one of those things that will hold true just like death and taxes do: rising college costs have always been a rite of passage for all of us -- parents and kids alike!&nbsp; (Check out our <a href="http://www.wisebread.com/college"><strong>College Financial Aid How-to&nbsp;Guide</strong></a> for ideas on how to deal with the rising cost of higher education.)</p> <p>But I'd like to bring up the notion that perhaps not all parents are intending to save for their children's education.&nbsp; No, they've decided not to set up that Coverdell ESA with an online stock broker or mutual fund company. There may be various reasons why this is the case and it's something I'd like to explore a little; I'd also like to determine how some well-meaning families are coping with the pressures of paying for college.</p> <h3>7 Reasons Why Parents&nbsp;May Decide Not To Save For College</h3> <p>I am making these points mainly to elicit discussion.&nbsp; But do you know anyone who has decided not to save for college?&nbsp; And if so, why don't they?&nbsp; I thought about it a bit and came up with a few possible reasons (or &quot;excuses&quot;):<br /> <strong><br /> 1. You feel that you don't have enough resources.</strong></p> <p>A common reason for not saving for college is that you just don't have enough money to fund competing financial goals.&nbsp; The rule of thumb here is that you should first fund your retirement accounts before you contribute to your child's <a href="http://www.wisebread.com/college/section-529-plans">529 college savings plan</a>. The reason?&nbsp; It's more important to ensure that you take care of your own future to avoid having others worry about you in your old age.&nbsp; Your kids can qualify for financial aid, but it will be tough for you to handle any shortfalls in your retirement years if you don't have the means or the savings to live on.&nbsp; Now if financial resources are the issue for you, you may be assured by the knowledge that there are easier ways to get others involved with your savings goals: perhaps an avenue like a 529 account or a free savings account like SmartyPig that allows others to help contribute to your goals may be helpful.&nbsp; It's something worth checking out.</p> <p><strong>2. Some kids are independent and make their own decisions.</strong></p> <p>I believe that not everyone is necessarily cut out to go to college.&nbsp; It's also often the case that people in the cusp of adulthood will feel that they aren't ready to enter college at a certain point in their lives.&nbsp; Of course, they may always change their minds later, and that's something that they can decide for themselves.&nbsp; Now there are kids that only need a little motivation to be able to make it through school.&nbsp; If you're a parent, you'll know whether your child is the type whom you should trust with this important decision; and based on how you gauge your child, some of you may realize that your child may not require you to cover 100% of their educational needs.</p> <p><strong>3. Some parents expect their kids to pay their way.</strong></p> <p>Maybe it's a lesson in life that they'd like to impart to their kids, but many parents make the conscious decision to have their kids pay their way through school.&nbsp; In the past, by cobbling together various financing resources such as <a href="http://www.wisebread.com/how-to-win-small-scholarships-for-a-big-payoff">college scholarships</a>, <a href="http://www.wisebread.com/college/financial-aid">financial aid</a>, work and <a href="http://www.wisebread.com/college/federal-student-loans">student loans</a>, a student can make their way through college on their own.&nbsp; But in recent years, with college costs much more expensive, leaving the financial burden for college solely on your child may no longer be a reasonable option.&nbsp; Perhaps your children's efforts would probably be better spent attaining a full-time college education and then paying you back once they get a secure full-time job in their chosen career.</p> <p><strong>4. Kids of veterans may receive reimbursements of educational costs.</strong></p> <p>Children of veterans are entitled to have 70 percent of their college education reimbursed.&nbsp; However, parents must still pay for the first semester of college in full. Once the child attains a grade of C or better in all subjects, a designated percentage of the tuition is reimbursed.&nbsp; Parents can roll these reimbursements into paying for the next semester but still need to come up with the remaining money for their kids' education.&nbsp; Again, 529 programs such as the one offered by the College Advantage Ohio 529 Savings Plan may help you build up some of the savings needed to support your child.&nbsp; Veteran parents can save more on their children's schooling by remaining apprised of the latest programs available to them.&nbsp;</p> <p><strong>5. Certain families don't see the value of higher education.</strong></p> <p>Unfortunately, not all people find value in going to college. Those folks who are particularly entrepreneurial by nature may think that their kids may be better off getting the experience from the school of hard knocks, say by working in the family business.&nbsp; They may value life experiences above those that can be obtained from a structured, academic environment.&nbsp; In this case, it's all about the family's values.&nbsp;</p> <p><strong>6. Some parents have lowered expectations.</strong></p> <p>If a child is not doing that well in primary school, his or her parents may end up having lower expectations of the child. Without noticing the potential, some parents may become discouraged about helping their kids pursue a higher education.&nbsp; It's sad, but could they be unwilling to take the risk of investing in their child's education?&nbsp; I believe that no matter what, we shouldn't give up on our kids as surprising transformations can happen in people.<br /> <strong><br /> 7. There's the belief that what's good for the parent is also good for the chld.</strong></p> <p>There are some parents who didn't finish college or never attended college, and because of their own experiences, they may not feel compelled to have their kids acquire an education on their dime.&nbsp; But fortunately, there are many parents who don't think this way, despite the fact that they've never made it into the hallowed halls of academia.&nbsp; There are many parents who value college highly and look upon it as the holy grail for the next generation; therefore, they do what they can to encourage their children to get a degree.&nbsp; These are the stories that should inspire us to think about how we can push forward to better ourselves and the plight of the youths in our lives. </p> <p>Having the opportunity to attend college is priceless and even when resources are low, there may be ways to save up for this important phase in your child's life.&nbsp; If there's a will, there's a way.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/silicon-valley-blogger">Silicon Valley Blogger</a> of <a href="http://www.wisebread.com/are-you-saving-for-your-childs-college-education">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/tips-for-increasing-your-financial-literacy">Tips for Increasing Your Financial Literacy</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-basics-of-asset-allocation">The Basics of Asset Allocation</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-investing-lessons-you-must-teach-your-kids">10 Investing Lessons You Must Teach Your Kids</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/why-index-funds-are-the-best-choice-for-new-investors">Why Index Funds Are the Best Choice for New Investors</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-10-step-staircase-to-a-comfortable-retirement">The 10-Step Staircase to a Comfortable Retirement</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment 529 savings account children's education college education investment saving for college Mon, 04 Jan 2010 17:00:09 +0000 Silicon Valley Blogger 4373 at http://www.wisebread.com