A major thing I regret from my childhood is not asking my parents more about my college fund. They were secretive people — never liked to discuss finances with their children. But when I got to college, it turns out they didn't have enough. Not only did I feel betrayed, but also insecure about my own future.
I'm not saying you should save every cent you earn from the moment your little bundle of joy pops out, but there is a method to stress less and still secure a financially stable position for your child, even if they don't want to go to college.
Where do I start?
Hey, if you're good and ready, you can start even before they're born! But only do this if you know for certain that a child will come along somewhere down the road and if you are already financially stable. Make sure that you have enough for your retirement, an emergency fund and any outstanding loans you need to pay. Consider slashing off the high-interest loans and student loans first since they are often the trickiest.
How do I start?
Sign up for a college savings account and start contributing as soon as you can. The 529 plan is a good call because they are federal tax free and low maintenance, but IRA's have a higher interest rate. Even if you only put in $100 a month, by the time they're 18, you'll have about $38,932 in the account based on a 6% return.
There are two options for the 529 plan — prepaid tuition and college savings. The prepaid tuition only allows the funds to be used for tuition and mandatory fees, are backed or guaranteed by state and have a beneficiary age limit to list some of its qualities. The college savings plan allows funds to be used for any kind of college expense, has no state guarantee and are open to all ages.
IRA's are mostly for retirement, but if you had or are planning to have kids later on, it might be better for you. However, if you withdraw from a traditional IRA before age 59.5, it'll result in a ten percent penalty. Another advantage is that you can roll funds from your 401k into the IRA.
Standard savings accounts are also another option but probably the least practical. When you're applying for financial aid, they literally ask you anything and everything. So, having too much money under your child as the beneficiary might be hurtful instead of helpful.
College is not only going to be $40,000 like mentioned above. However, if you qualify, SUNY and CUNY schools in New York City have recently become tuition-free for qualifying families. But even most state schools like UMass Amherst in Massachusetts has a tuition of $15,000 for in-state residents.
If your child wants to go to a private institution, tuition can be as high as $40,000 to $50,000 for schools like New York University and Trinity College. You should apply for as many scholarships as you can, even sending your child to preschools and programs that are known to give out scholarships to their alumni.
Also note that tuition and fees do NOT cover the cost of room and board, transportation and books. So where we're at right now — that $40,000 might cover one year of a public institution with scholarships and financial aid.
What else can I do?
So over time, you'll want to invest more and more for your child — if you can of course. Work on paying off debts and loans as you invest and have your child take summer jobs. If you do end up taking out loans, make sure you let your child know how they work and how much time they'll have to pay them off.
I was lucky enough to have a wealthy family member that loaned me the rest of my college tuition. The result was an interest free exchange that also didn't have a time limit.
Now that I've finally scared most of you off from having a kid, I want to tell you that it isn't all bad. College is a sound investment because most jobs require a degree nowadays. Securing a spot at a top university with a strong alumni network will give your child opportunities for more internships and job offers during and after their undergraduate experience. Thus, saving for college is not only an investment in your child, but also an investment for you to be taken care of in old age.
- College Savings Plan Network ›
- The Internet Guide to Funding College and Section 529 College ... ›
- The Five Best College Savings Plans ›
- College savings plans: Picking the right one | Vanguard ›
- What Is a 529 Plan? ›
- NY's 529 College Savings Program | NY 529 Direct Plan ›
- College Savings Iowa 529 Plan ›
- Simple Rule for Calculating Where You Stand on College Savings ... ›
- College Savings Iowa 529 Plan ›
- College Savings Bank ›
What is Robinhood?
The Robinhood app debuted in 2013 as a first-of-its-kind revolutionizing free investment platform. Much like the 700-year-old story of the hero to the people, Robin Hood, FinTech entrepreneurs Vladimir Tenev and Baiju Bhatt created the platform in order to make stock trading easily accessible to the general public and not just the wealthy.
The National Financial Educators Council (NFEC) surveyed young adults in 2017 and asked them what high school level course would benefit their lives the most.
The majority responded that money management was the course that would be most beneficial.
With personal debt is at its highest record and COVID-19 threatening to have the hardest economic effects on youth, understanding money and finances is an important life lesson that should be taught to children at a young age.
The following is a list of the best financial literacy lessons and tips to teach children throughout different life stages.
I thought I had a pretty good handle on my finances out of school. I worked several jobs while attending university and had little to no problem managing my income. However, once I graduated, I realized how much more complicated personal accounting could really be.
There were so many variables I needed to keep track of. Biweekly bills, monthly charges, and general necessities amounted to a heap of confusing numbers that were often impossible to decipher. The funniest part was that I was actually trying to do this by hand (I don't know what I was trying to prove to myself, either).
After messing up for the 17th time, I decided to give Microsoft Excel a shot. I used Excel a bit in school and I knew all the big-wig finance people used it, so what could I possibly have to lose? The answer is about six hours of my precious time. Excel isn't much of an improvement over handwriting and it's still dependent on the user to manually input all of the information. It's like doing everything by hand with the slightest help, meaning that it still required a tremendous amount of time and concentration. Well that was all for nothing, I guess.
It's sort of funny. I was certain that I could manage my personal finances with ease, when it's practically a full-time job. I was already stressed out enough with my first job and I knew I didn't have enough time to give my finances the attention it deserved.
That's why I decided to try out a budgeting app. My best friend told me that he uses an app called Truebill to manage his finances. "What does it even mean to manage your finances?" I asked him. He told me that Truebill was the personal financial assistant I wished I could have. It could aggregate all of my account information into one place and give me specific insights and actions.
I loved the idea of having full control over my finances, especially during a time of financial uncertainty, and I realized that Truebill would be the easiest way to accomplish this. The user interface is incredibly simple and intuitive, so it doesn't even feel like a finance app! Truebill offers a multitude of features, with their most popular being the ability to cancel subscriptions with the press of a button.
Okay, I had no idea how many subscriptions I was still subscribed to. In fact, I wasn't even using a quarter of the subscription services I was signed up for. Subscription boxes, streaming services, my old gym, and even an old subscription to my favorite magazine--it was all there and I was livid. How could I let myself waste all of this money and how did I never catch this? Thank goodness for Truebill.
Truebill also offers bill negotiations. There is a 40% fee based on how much you save and Truebill even claims that there is an 85% chance that they'll be able to lower your bill once a negotiation is requested. Why wouldn't I take them up on this? There was zero risk and I would only have to pay once my bill was lowered (which means that I would be saving money regardless).
More standard features of Truebill include the ability to generate a credit report on-demand and even request a pay advance. I only used the pay advance feature once when I wanted to buy a gift for my mom, but didn't have enough cash in hand and Truebill automatically reimbursed itself when I got my next paycheck.
The credit report is another fantastic feature and practically taught me what good credit meant. Truebill's credit report basically shows you which financial decisions have the most significant impact on your credit score and ways that you can improve your credit month-over-month. I've never had such control over my credit and it feels good.
I'll be the first to admit that I was extremely naive coming out of school. I figured that as long as I was attentive, I could manage my finances with ease. We manage money to some extent throughout our entire lives, but once you're thrown out on your own, it's a completely different story. With Truebill, I've finally been able to take control over my finances and stay on top of all of my responsibilities.