College Financial Planning

2 06/29/2007 2:30pmeSlide - P WorkLife4You Objectives Understand the basics of college financial planning Discuss guidelines for creating a savings and investment plan Identify financial vehicles available to help you afford higher education Learn how you can afford your child’s education even if you’ve starting saving late Your objectives?

3 06/29/2007 2:30pmeSlide - P WorkLife4You How Much Is It Going to Cost? Type of CollegeProjected Total Cost Required Monthly Savings 4-year public in-stateApprox. $136,118$740 4-year public out-of-stateApprox. $217,053$1,179 4-year privateApprox. $274,005$1,488 Type of College% IncreaseAverage Cost/Year 2-year public6.0$ 2,713 4-year public in-state7.9$ 7,605 4-year public out-of-state6.0$19,595 4-year private non-profit4.5$27,293 Projected future costs & required savings: 2020 The Bottom Line: Be sure to account for total college expenses – not just tuition tuition costs

4 06/29/2007 2:30pmeSlide - P WorkLife4You Why It Pays to Start Saving Early The key to saving is planning The power of compounding interest Investing $1,000 at 5% interest

5 06/29/2007 2:30pmeSlide - P WorkLife4You Saving and Investing 101 Time Horizon—How soon do you need the money? Investment Objectives—What do you want the money to do for you? –Growth of capital –Preservation of principal and income generation –Balancing income and growth

6 06/29/2007 2:30pmeSlide - P WorkLife4You Saving and Investing 101 Asset Allocation –Equities –Fixed Income Securities –Money Market Instruments Asset Diversification –Aggressive –Balanced –Conservative

7 06/29/2007 2:30pmeSlide - P WorkLife4You Basic Guidelines for Saving and Investing Research and study your options Consult a professional financial planner Figure out how much you can save and invest and create a monthly budget Understand the risk and determine how much risk you are comfortable with Plan for tax consequences Don’t rely solely on financial aid

8 06/29/2007 2:30pmeSlide - P WorkLife4You Savings Vehicles Savings accounts Certificates of deposit (CDs) Money market accounts/Money market mutual funds

9 06/29/2007 2:30pmeSlide - P WorkLife4You Investment Vehicles Stocks Bonds Mutual Funds

10 06/29/2007 2:30pmeSlide - P WorkLife4You College-Specific Savings Options Coverdell Education Savings Accounts (ESAs) Traditional or Roth IRAs 529 Plans College Savings Clubs

11 06/29/2007 2:30pmeSlide - P WorkLife4You 529 Prepaid Tuition Plans Pros Investment is guaranteed to meet or exceed future tuition costs Low-risk investment Cons Choice of schools may be limited to state-run institutions Some plans limited to state residents May not cover other educational expenses such as books, supplies, room and board Heavy penalties may apply for canceling May reduce your eligibility for financial aid Conservative investment

12 06/29/2007 2:30pmeSlide - P WorkLife4You 529 College Savings Plans Pros No residency or income level restrictions Invest and forget Choose any state’s plan you want Impact on eligibility for financial aid is low High contribution limits Contributions are exempt from gift tax (up to $13,000 per year or $65,000 lump sum spread with exemption spread out over 5 years) Cons Limited investment choices Plan manager fees may apply Not guaranteed to make a profit

13 06/29/2007 2:30pmeSlide - P WorkLife4You College Savings Clubs Don’t spend money you wouldn’t otherwise spend Make sure the participating companies are those whose products you regularly buy Find out how much you get back Ask which 529 plans are included in the program Investigate whether you have the option to get cash back Find out if there is a fee to join

14 06/29/2007 2:30pmeSlide - P WorkLife4You Other Funding Sources Employee stock plans 401(k) plan loans 403(b) plan loans Borrowing against the value of your home Borrowing against a life insurance policy

15 06/29/2007 2:30pmeSlide - P WorkLife4You Tax Breaks for College Costs Education Tax Credits: –American Opportunity Credit –Lifetime Learning Credit Tax deductions for interest on student loans Contact IRS at or 800-TAX-1040 ( )

16 06/29/2007 2:30pmeSlide - P WorkLife4You If You’re Starting Late… Make sure your child is really interested in and/or ready to go to college Look for a school that offers a co-op or internship program Consider state schools Choose a less expensive school—at least for the first two years Seek as many forms of financial aid as possible

17 06/29/2007 2:30pmeSlide - P WorkLife4You Financial Aid Options Non-need-based –Scholarships Need-based –Grants –Loans –Federal Work Study (FWS) Program

18 06/29/2007 2:30pmeSlide - P WorkLife4You Resources Professional financial advisors Software programs and the Internet Books, periodicals and other reference materials Community resources Plus, some expenses associated with these resources may be tax deductible!

WorkLife4You Resources Education Web Service –College Financing Library –College Library Finance Web Service –Education Library –Education: Financial Aid Library –Investing Library –Personal Finance Library Interactive Calculators College Savings, Savings, Savings Amount, Starting Savings Amount, Future Value, Portfolio Value HTML Articles Audio Tips Budgeting Basics, Preparing for and Applying to College OnDemand Webinars College vs. Retirement, The Basics of Investment, Planning Your Financial Future, Teens and Money, Preparing for and Applying to College, Preparing Your Child and Your Family for College WorkLife4You Guides Choosing a Financial Professional, Investment Basics and Vehicles, How to Make a Budget and Stick to It, Personal Budgeting Worksheet 19 06/29/2007 2:30pmeSlide - P WorkLife4You WorkLife4You Web Site ww.WorkLife4You.comww.WorkLife4You.com

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