Your 529 Has Company: Other ways to fund a child’s education

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Saving for college is important if you want to assist your children in furthering their education. 529 plans are well known and commonly discussed but we rarely hear about other ways to save for a child's education. This is where the Uniform Gift to Minors Act (UGMA) and Uniform Transfer to Minors Act (UTMA) become relevant. This draft legislation has been around for decades and most states have enacted it, thereby creating what are often nicknamed UGMA and UTMA accounts. What are the basic rules of UGMA and UTMA accounts? UGMA/UTMA accounts allow you to save for a child’s expenses. These accounts can be used for college tuition, or they can cover a wide array of other expenses. This is a benefit UTMA/UGMA accounts have over 529 plans. For instance, UTMA/UGMA account assets can be used to buy a child a car while a 529 plan cannot.  These accounts can be set...

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How can you help your grandchildren pay for college?

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Navigating the college landscape for students and parents can be frustrating.  Gone are the days when students could work part time jobs to cover most or all of their tuition.  When students graduate, they often have a hard time paying off their loans. This forces them to delay other purchases, like owning a home. If you are a grandparent who is in a financial position to ease the burden on your grandchildren, here are some ways to help. Pay Tuition Directly In 2017, the annual gift tax exclusion is $14,000 per person. This means you can give up to $14,000 each year to as many people as you want without filing a gift tax return. However, if you would like to help your grandchildren with tuition bills you can pay the school directly. You will not be limited to a particular dollar amount because the Internal Revenue Code allows an unlimited gift...

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Federal Student Loans: Should the Parent or Child Take out the Loan?

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Every parent wants to do what is best for their child and give them a chance to lead a successful life. For many this ideal includes a college education. This is why many parents sign for student loans without a second thought to what the implications might be. The Federal government offers loans to parents to help pay for their child’s college education, these loans are called Parent PLUS loans. Students have several loan options including Federal Perkins loans, Subsidized and Unsubsidized Stafford loans, and Graduate PLUS loans. Below I’ll compare the Parent PLUS loans to the Direct Subsidized and Unsubsidized Stafford loans a student can receive.   Interest Rates When using Federal student loans, students may be eligible for subsidized or unsubsidized loans. For loans disbursed between 7/1/2017 and 7/1/2018, undergraduate students will pay an interest rate of 4.45%. Conversely, parents under the PLUS loans program will pay 7% in interest. The...

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A first-time homebuyer’s guide

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Buying your first home is exciting! Start out by considering your needs, wants, and wishes for your new home.  Some first time buyers want to start out smaller and buy the classic “starter home." Others prefer to wait until they are financially ready to buy a home they plan on staying in for several decades. What can you afford? How should you run some initial calculations? Several factors play into what your monthly mortgage payment will be. First, what is the amount you plan on borrowing (cost of the home minus your down payment)?  Second, what is the interest rate you will be charged by the bank? A quick Google search will give you a good idea what current mortgage interest rates are. The length of your mortgage also makes a difference. If you choose a 15-year mortgage, your payments will be higher and interest rates will be lower when compared...

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Saving for a Wedding is Hard: Financial Success in Marriage is Harder

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While engaged couples focus plenty of attention on how to save for a wedding, many overlook the critical planning required to have financial success after the big day. Get to know the basics Primarily, you and your future spouse should discuss the basics of your financial situation before you get married. Have at least a basic understanding of your mutual assets and liabilities. This information is vital to assess how your current situation will affect future goals and to set expectations on how you plan to work together to meet them. If you plan to buy a home shortly after the wedding, but have not saved enough for a down payment, you can adjust your spending accordingly to incorporate this goal. It is also important to recognize when prenuptial arrangements should be discussed, because spouses are likely entering the marriage with significantly different financial situations. Getting married may also affect your student loan payments...

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I received a large sum of money: So now What?

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So you received a big bonus, inherited money, or won a large court settlement. Great! You likely feel excited, but maybe a bit overwhelmed too. You feel pressure to make a good decision on what to do with your newfound money because you want to make the most of it. Where do you start? Emergency Fund First you want to make sure you have an adequate emergency fund. Emergency funds should be anywhere between six months and a year’s worth of living expenses. This rule is purposely flexible; if you work in a field where jobs are scarce, you may want to have an even larger emergency fund. Or, if you have a particularly large expense on the horizon, add that figure to your goal emergency fund. Emergency funds may not be exciting, but remember, life is full of unexpected expenses. Most insurance policies have deductibles -- including medical, auto, and home...

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7 Quick Tips for Tax Season

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1. Organize your paperwork. Review your prior year tax return to help you think about what you could be missing. Also consider what has changed this year compared to last year. Online access to your various accounts may expedite the process of collecting all your documents. Usually you will get an email when forms are ready rather than waiting for them to come in the mail. 2. Consider taking advantage of free filing. If your tax situation is fairly simple you may be able to take advantage of free filing websites. Depending on what website you use they have limits on how high your adjusted gross income can be to file for free. To see a full list of websites and limitations check out this page on the IRS website: https://apps.irs.gov/app/freeFile/jsp/index.jsp?ck 3. Call your CPA or tax preparer early. Due to high demand for their services during tax times CPAs and other tax preparers can have very...

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Do you need more than a retirement Calculator?

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Interactive retirement calculators are popping up all over as a means to simplify the questions of “Can I retire?” and “Am I saving enough to retire?” 401k providers are even adding sections to their routine reports to estimate the monthly income the future retiree can expect to receive from the portfolio. These tools are fast and simple, however, they might not be the only analysis needed to ensure you are on the right track. All retirement projections or calculators revolve around several assumptions used to generate the results. Therefore taking time to research the information and talk to a professional about your inputs are a necessary step. For example, take the question, “How many years will I actually be retired?” Put more bluntly this question asks, ”When will I die?” It is very easy to pick the age you want to live to rather than what might be realistic based on averages,...

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Three must-have personal finance apps

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Apps are designed to make our lives easier and more functional. But it is hard to find the best apps among the thousands of those available for download. Here are my top three picks for best free personal finance apps. Credit Karma Credit Karma is an easy way to obtain your credit score and, just like the commercial says, it’s really free! The app relies on advertisements from credit cards and personal loans for revenue.  The advertisements are based on algorithms to show you ads they think would be interesting to you based on your situation. Credit Karma isn’t the only free way to get a peek at how lenders view your creditworthiness. The Federal Trade Commission allows you to receive one free copy of your credit report once per year from each of the 3 credit reporting agencies. However, this report is only a copy of your report, it does not...

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Lackluster Financial Education Standards in U.S. High Schools

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How did you learn to balance a checkbook or invest in your 401k? Did you have a formal education on the subject? Did you seek a professional? Or did you just figure it out? The type of financial education you receive as a U.S. high school student depends largely on what state you are in. We have requirements ranging from personal finance as a mandate - for all students - to states that don’t include it in their education standards. Teachers today are pushed to their limits. As a result, increasing access to personal finance education is not a top priority. It is expected that parents pick up where the schools leave off. However, many parents are ill-equipped to continue their children's financial education. They may lack confidence in their knowledge, or it may not seem critical to teach them at all. Many are unable to teach their children because their...

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