Question for the Boston Money Coach:
What should I be doing now to prepare for my children’s college expenses?
This is the second part of an answer to this question posed by parents of two young children worried about the rising costs of higher education and student loan debts. Confused about where to start, they need help from Boston’s Money Coach.
Response from Boston Money Coach – Steve Stanganelli:
With two young children you possibly have twice the worry but the good news you have time to plan. Let’s look outside the box for a moment.
You need to look at options to lower your costs. You need to consider tax and asset strategies to lower your expected family contribution (EFC). These include numerous tax breaks for business owners (even those who own a small solo practice as a side line business). One hint: Don’t give your kid an allowance when you can pay them to do work in your business which they then can use to fund a Roth IRA that may be used for their education as well. Whether this is a side business or your main source of income, this type of tax planning can work for you to lower your EFC and fund either college or retirement – a triple win.
You may have generous relatives who want to help. That’s great! But you want to make sure that they set things up right to minimize the impact on qualifying for financial aid. This certainly applies to trusts and 529 Savings Plans. I’m a fan of www.SavingforCollege.com which will cover some of this but don’t forget that a knowledgeable advisor is worth his or her weight in areas like this.
And let’s not forget about tried and true strategies to earn college credit that may help accelerate your student’s time to earn a degree. You can find out more at www.CollegeBoard.com and www.getcollegecredit.com.
While it may be early, you can also consider the role of scholarship money in your plan. Although things may change over time, it may be a good idea to get a lay of the land. Peterson’s Guide is a great resource (www.Petersons.com) as is www.CollegeScholarships.org.
Looking for ways to build up the cash for college and trying to discourage relatives from giving lots of toys at holidays? Consider using a service that helps facilitate contributions from relatives directed toward your student’s 529 Savings Plan or other savings account. This is done through the College Registry service of www.eRollover.com.
There are lots of choices and options. Confusing? Yes. But you have time. And you have access to qualified financial planners who can help you through all this.
Check out the financial aid tips found in the latest issue of College Ed Xpress found at www.CollegeCashPro.com.
