Saving for Your Child’s College Education


DID YOU KNOW THAT TODAY THE
AVERAGE COST OF A PUBLIC COLLEGE EDUCATION IS MORE THAN $18,000
DOLLARS A YEAR? AND FOR A PRIVATE COLLEGE? GET READY.
$41,000 A YEAR. WHOO.
WELL, THANKFULLY SEPTEMBER HAPPENS TO BE COLLEGE SAVINGS
MONTH. I LOVE TO SAVE. SO, IT’S THE PERFECT TIME TO CHAT WITH
CERTIFIED FINANCIAL PLANNER MARY RYAN FROM VANGUARD. ONE OF THE
LARGEST AND MOST RESPECTED INVESTMENT COMPANIES ON THE
PLANET SO I’M SURE SHE HAS SOME FABULOUS INSIGHTS FOR US. GOOD
MORNING! GOOD MORNING OLGA.
YOU’VE BEEN DOING THIS A PRETTY LONG TIME.
YEAH. YOU LOVE IT.
LOTS OF CHALLENGES? I HAVE. I’VE BEEN IN THE
FINANCIAL PLANNING BUSINESS FOR OVER 20 YEARS.
WHOO! AND I LOVE IT BECAUSE I WORK
WITH MY CLIENTS AS PARTNERS. WE SET THEIR GOALS, WE DO
EVERYTHING WE CAN TO ACHIEVE THOSE GOALS AND WHEN THEY DO
THAT IS VERY SATISFYING. AND DOING THE GOALS AND YOU
KNOW, THE FINANCIAL GOALS, EVERYBODY HAS THEM. WHAT IS
SAVING FOR COLLEGE FUND RANK? IN TERMS OF SOMEONE’S LIFE.
WELL, EVERYBODY IS DIFFERENT OBVIOUSLY.
CORRECT. BUT YOU KNOW, FOR PEOPLE THAT
HAVE CHILDREN AND FAMILIES THAT HAVE CHILDREN, THE U.S.
DEPARTMENT OF LABOR HAD SOME VERY INTERESTING STATS. SO, WHEN
YOU LOOK AT THAT, YOU HAVE TO UNDERSTAND THAT HAVING A COLLEGE
DEGREE, UNEMPLOYMENT TENDS TO BE LESS. EARNINGS TEND TO BE
HIGHER. SO, I’D LIKE TO SAY, YEAH, I THINK IT’S VERY
IMPORTANT ON THE RANKING. WHEN I GOT PREGNANT, IT WAS THE
FIRST THING ON MY MIND. WELL, I WANTED A GIRL. I WANTED HER TO
BE HEALTHY AND I THOUGHT OF HER COLLEGE. THOSE WERE THE THREE
THINGS. (LAUGHS)
AND I, SO FAR SO GOOD. THERE YOU GO.
(LAUGHS) NOW, LET ME ASK YOU THIS. A LOT
OF PEOPLE SAY YOU KNOW, IT’S IMPORTANT TO PUT SOME MONEY
ASIDE. TODAY’S ECONOMY, YOU KNOW, MARY, EVERYBODY IS
WATCHING EVERY CENT. HOW DO THEY GET OVER THAT HUMP AND THAT FEAR
OF PUTTING SOMETHING AWAY? WELL, AS YOU SAID AT THE
BEGINNING OLGA, THE COST OF EDUCATION CAN BE SO
OVERWHELMING. AMAZING.
IT IS SO OVERWHELMING. AND I TELL PEOPLE. TAKE A STEP BACK,
DON’T GET OVERWHELMED, DO WHAT YOU CAN.
LOOK AT YOUR BUDGET. SEE WHAT YOU CAN FIGURE OUT.
BUT AS LONG AS YOU HAVE A PLAN, YOU HAVE A GOAL, STICK WITH IT.
BE DISCIPLINED BUT DO WHAT YOU CAN. DON’T GET OVERWHELMED.
BECAUSE DON’T FORGET, EVERY DOLLAR YOU SAVE, IS A DOLLAR YOU
DON’T HAVE TO BORROW. SO, YOU WANT TO MAKE SURE YOU’RE DOING
THAT. AND WHEN DO YOU START SAVING FOR
THAT COLLEGE SAVINGS PLAN? NEVER TOO EARLY.
REALLY? NEVER TOO EARLY.
NOT WHEN YOU HEAR YOU’RE PREGNANT.
NO! PEOPLE CAN START BEFORE THEY
EVEN START HAVING CHILDREN. PUT IT IN YOUR NAME AND THEN AS THE
CHILDREN ARRIVE, YOU CAN MOVE IT TO THEIR NAME AND START SAVING
THAT WAY. WHAT THAY DOES, OLGA, IS IT GIVES THE POWER OF
COMPOUNDING THE POWER TO WORK FOR YOU.
AND THAT’S REALLY IMPORTANT. WHAT KIND OF EDUCATION SAVINGS
PLANS ARE OUT THERE? THERE’S JUST SO MANY THAT
SOMETIMES IT CAN BE QUITE INTIMIDATING.
IT IS. AND THERE’S SO MANY OUT THERE.
YOU HAVE PLANS SUCH AS PEOPLE USE BANK ACCOUNTS, SAVINGS
ACCOUNTS, YOU KNOW, SAVINGS BONDS, INVESTMENT ACCOUNTS.
WHAT YOU LIKE. YEAH. WE HAVE FOUND THOUGH, IN
WORKING WITH OUR CLIENTS THAT ARE COLLEGE SAVERS, 529 PLANS
REALLY REALLY ARE WONDERFUL. THEY OFFER A WIDE VARIETY OF
BENEFITS. FOR EXAMPLE, YOU KNOW, YOU CAN LOOK AT IT AND GET SOME
TAX BENEFITS IF YOU USE IT FOR HIGHER EDUCATION.
WHAT ELSE DO YOU LIKE ABOUT IT? THERE’S SO MANY OTHER PEICES TO
IT THAT ARE GOOD. NOW, I MENTIONED THE TAX BENEFITS. THE
EARNINGS IN A 529 PLAN, THEY NOT ONLY GROW. THEY GROW TAX FREE
NOT TAX DEFERRED. OH!
THAT’S A BIG ONE. THAT’S BIG.
ALSO, SOME STATES WILL OFFER TAX DEDUCTIONS THAT YOU CAN TAKE A
TAX DEDUCTION ON YOUR TAX RETURN DEPENDING, YOU KNOW, DEPENDING
ON HOW MUCH YOU’RE PUTTING IN THERE.
GRANDPARENTS LOVE IT BECAUSE THEY CAN DO GIFTING FOR COLLEGES
AND FOR THEIR GRANDCHILDREN. IF YOU START SAVING FOR ONE CHILD
AND YOU WANT, THEY DON’T USE THE MONEY, YOU CAN GIVE IT TO
SOMEBODY ELSE OR USE IT YOURSELF.
OK. OUR PARTNERS SINCE IT’S COLLEGE
SAVINGS, HAS RUN A, CONDUCTED A SURVEY AND THEY WENT OUT AND
FOUND THE PEOPLE THAT HAVE 529 PLANS FOR THEIR COLLEGE SAVINGS
ARE MORE CONFIDENT AND FEEL MORE IN CONTROL OF THEIR EDUCATION
SAVINGS. THEY ALSO FOUND THAT 8 OUT OF 10 PEOPLE THAT HAVE 529
PLANS ARE HAPPY WITH THAT PLAN. ARE THERE LIMITATIONS, MARY? TO
CONTRIBUTE TO THE 529? DEPENDS ON THE PLAN. DIFFERENT
STATES HAVE DIFFERENT RULES. MOST OF THEM, HOWEVER, DO OFFER
VERY HIGH AMOUNTS THAT CAN GO IN A 529 PLAN. NOW, YOU NEED TO BE
CAREFUL ABOUT FEDERAL AND STATE TAX OR GIFTING LAWS. SO, BUT YOU
CAN FIND THAT ON THE WEB AND YOU CAN LOOK THAT UP. SOME PLANS CAN
GO OVER $300,000 FOR THE LIFETIME OF THE 529 PLAN.
MARY, IF I START A 529 PLAN HERE IN FLORIDA FOR MY CHILDREN AND
THEY DECIDE TO GO SOMEWHERE ELSE. CAN IT BE USED OUT OF
STATE? THAT’S A GREAT QUESTION, OLGA.
529 SAVINGS PLANS CAN BE USED IN ANY STATE. SO, THEY CAN USED IN
THE UNITED STATES AS WELL AS ABROAD.
REALLY? YES! SO, YOU CAN ALSO USE THEM,
THEY CAN BE USED FOR VOCATIONAL SCHOOLS, COMMUNITY COLLEGES, 4
YEAR COLLEGES, UNIVERSITIES, GRADUATE SCHOOLS. SO, THEY ARE
NOT AS LIMITING AS ONE MIGHT THINK.
AND WHAT ABOUT FINANCIAL AID? BECAUSE I KNOW THAT RINGS A BELL
IN LOT OF PEOPLE. 529 SAVINGS PLANS HAVE A LIMITED
IMPACT ON FINANCIAL AID. SO, TO ME, IT’S GREAT
INFORMATION. BUT A LOT OF THINGS HAVE BEEN LEARNED HERE BUT
SOMETHING THAT I JUST THINK IS IMPERATIVE, IS NO MATTER WHAT
YOU HAVE, EVERY LITTLE BIT COUNTS.
EVERY LITTLE BIT COUNTS AND JUST REMEMBER, EVERY DOLLAR YOU SAVE
IS A DOLLAR YOU DON’T HAVE TO BORROW. DO WHAT YOU CAN. GET A
PLAN AND STAY WITH IT. I HOPE TO SEE YOUR KIDS IN
COLLEGE WITH MY KIDS VERY SOON. YES!
THANK YOU SO MUCH, MARY. AND OF COURSE IF YOU’D LIKE MORE
INFORMATION ON ALL OF THIS, YOU CAN CHECK THE WEBSITE WHICH IS
VANGUARD.COM OR GO TO OUR WEBSITE WHICH IS
THEBALANCINGACT.COM AND DON’T FORGET WE ARE ON
FACEBOOK AND TWITTER.

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