Show Me the Money – Keys to Saving for A Child’s Education

Saving Issues  An advanced education is important  An expensive investment  How much is enough?  Tax breaks  Titling educational savings  Family members/friends chipping in  Competing expenses  You have some advantages

Tough Choices for Savings  Your retirement  Your child’s advanced education

Tough choices…  Save and invest for your retirement before funding an advanced education  Why? There are many sources of loans for your or your child to borrow from for an education. No one will loan you money for retirement.  Goal – Do both

Three of the best reasons for going into debt:  House  Business  Quality education

A necessary education  Ability to earn a living and income go hand in hand  Critical that your child complete high school!  Few unskilled jobs today  What used to take a high school education now takes a college degree. What used to take a four year degree now takes a masters.

In order to earn a living  College –Two year –Four year –Professional –Graduate  Proprietary school –DeVry  Military  Trade school  Others

How much savings is enough?  A $100,000 question!  Higher education costs are rising much faster than the rate of inflation  Public v. private college? (public college grads do just as well)  “Mom, I’ve decided to go to law school”  “Dad, I think I’d like to be a surgeon”

Discuss your values…  I know many of your friend’s parents provide their teen with a car, however our higher priority is to help with your education…  I’ll fund half of a public college, in-state education – the rest is up to you…  Get an education to earn a living – not just learning for learning’s sake

Discuss your values…  I’ll fund only 4 years of undergraduate education. I’m not interested in funding a 5th year senior.  Your #1 occupation is to be a student and to earn the best grades possible. The money you can get through scholarships and grants will be much greater than what you could save from a part-time job.

Saving? Where do I start?  Pay yourself first  Develop the habit  You have the advantage of time –Saving early is better than later –Saving late is better than nothing

Finding the money to save  Decide right now if want to do more than give just lip service to saving  Pocket change $2 day  Sign up for only “Plain Jane” cable  Drive a car an extra year or two  Mow your own lawn  Control spending and debt (credit card type spending)

How to Fail – You fail when you sacrifice what you want most for what you want now

As you think about where to save education dollars…  Save it my name or my child’s  Are there tax advantages?  Risk/return

Why does it matter who’s name is on the account?  The person that owns it, controls it –Might buy a new red sports car instead of an education  How is it considered for financial aid? –All student’s assets available for education –Only 5 percent of parent’s assets

Options  Missouri Savings for Tuition Program (MO$T)  Education IRA  Series EE Savings Bonds  Mutual Funds  Prepaid Tuition  Uniform Gift to Minor’s Act

Pay the whole bill or just a part?  Student work a reasonable amount (not too much) –Part-time work –Work study  Grants and scholarships (don’t have to repay)  Student loans

Are there others to contribute?  Grandparents  Doting aunt

Time is on your side  Start when your children are very young  It is time, not timing, in investments that pays off  Start early rather than late  Control consumer spending and consumer debt