5 Things To Discuss Before Your Teen Heads Off To College

talking-with-momCommunication between college students and parents is key. Here are five important things to talk about before your teen leaves home:

The Budget

One of the biggest potential sources of family conflict is the college student budget. Whether you are funding your child’s education, or expecting him to come up with the money himself, your child will need to be on the same page. If your financial assistance will be limited, it’s important to explain what help you can provide and how it will be distributed. Plan to deposit five hundred dollars a month to help out? Say so. Don’t expect your child to intuit your financial plan.

Parents often promise to pay for college in full, but may not define their expectations clearly. Maybe you have been saving since your child was a toddler, but how to you plan to disperse the funds? What if the savings won’t be enough to cover living expenses all four years? Paying for college extends well beyond tuition.

Points to consider:

·      Who will pay living expenses? Will those be paid directly by parents, or will money be deposited in an account for the student to use to pay bills him/herself?

·      How will food, transportation, and clothing be paid for?

·      What about the cell phone?

·      Will parents pay for health care?

·      Who will pay for extras?

The Timeline

College isn’t always four years of coursework. Some students extend time in college because their programs last five or more years. Some change majors. Others take it slowly for the first couple of years.

If your plan is to fund college for your child, does your strategy take these things in to account? Is there a time limit to your financial support? How about your patience? Are you prepared to pull the plug if your child is on the seven-year plan? If so, maybe she needs to hear your thoughts ahead of time, so she can find a part time job or pick up the pace.

Crisis Situations

Medical or mental health crisis: Record numbers of college students are seeking mental health support according to recently published studies. Common mental health related causes for leaving college include: depression, anxiety, panic attacks, excessive drinking, and drug use. Are there medical or psychiatric issues that might prevent your college student from completing school uninterrupted? If so, under what circumstances might you need to bring him home? Does he know when to ask for your help?

Academic Crisis: Do you have a plan for failing college grades? Most paying parents won’t want to continue writing checks unless kids are producing passing grades. Have you discussed your views with your soon to be college student?

Breaks From School

Some parents express frustration when kids arrive back home during college breaks, dump their laundry next to the washing machine, and flop down into bed for the duration of the school break. If your son or daughter is home on break, do you expect him or her to help around the house? Work a summer job? Be up and at ‘em by nine every morning and in bed before midnight? Whatever your expectations, be certain to spell them out before the first academic break begins.

Plan B

Recent statistics estimate that almost half of college enrollees drop out before completing a degree. No parent sends a kid to college hoping she’ll drop out, but with estimated dropout rates so high, all parents and new college students should discuss alternative strategies in case college doesn’t work out.

 

Dr. Melissa Deuter is a psychiatrist in San Antonio, TX who specializes in the care of emerging adults. www.MelissaDeuter.com; @MStenDeut

 

7 Critical College Savings Questions Parents Should Ask

By Pamela Yellen

Paying for college without spending your life’s savings is one of the biggest challenges families face today. Many folks feel they must choose between saving for their children’s education and saving for retirement.

But what if there were a strategy that allowed you to do both? This is one of the advantages of the savings method I call Bank On Yourself. It uses specially designed, super-charged dividend-paying whole life insurance policies that grow by a guaranteed and pre-set amount every year. More than 500,000 Americans are using this method, many to simultaneously save for college and retirement.

In researching hundreds of savings strategies, I found this method be superior to traditional college savings plans, such as 529 college savings plans, UGMAs, UTMAs and student loans, for a number of reasons. Here are seven questions to ask when considering the best way to pay for college:

1. Do you have full control over how and when the money is used? With limited exceptions, you can only withdraw money that you invest in a 529 plan for eligible college expenses without incurring taxes and penalties. With UGMAs and UTMAs you lose all control the day your child legally becomes an adult. Student loan proceeds are paid directly to the college, so you have no control. The Bank On Yourself method gives you complete control.

2. Can you avoid having the funds count against your kids when they apply for federal student aid? Student loans and the cash value in a Bank On Yourself plan are not considered as assets. But the money in your 529 plan is counted as your asset, and UGMAs and UTMAs will be treated as your child’s assets. Having these assets will likely penalize your child when they apply for need-based financial aid.

3. If my child earns a full scholarship or decides to be an entrepreneur instead of going to college, can the money be used for non-educational purposes? The answer is “no” with traditional college savings plans; “yes” with the Bank On Yourself method.

4. Can I use the plan beyond college? The Bank on Yourself method allows you to use your savings however you choose. With 529 Plans, there’s the “Gotcha” of taxes and penalties. With UGMAs and UTMAs the money is not yours – it’s your children’s, and they can use it for whatever they want. Student loans can extend beyond college, but in a bad way – these loans can haunt the student for decades.

5. Are there tax benefits? With 529 Plans you may be able to get a state income tax deduction for your contribution, depending on where you live and the plan you choose. If the money is used exclusively for college, the gains in your plan, if there are any, can be tax-free. Gains in UGMAs and UTMAs can be taxed at the minor’s tax rate instead of yours, so that may save you some money. With student loans, there may be a state income tax interest deduction, depending on your income. With the Bank On Yourself method, you can take money at any time, and for any reason, and it’s possible under current tax law to do so with no taxes due.

6. What happens with my plan if I die prematurely? This is an important question, and unfortunately it’s one most families fail to ask. Among these college savings plans, only the Bank On Yourself method comes with a death benefit that allows your savings plan to “self-complete.”

7. Is growth of money in the plan guaranteed? In a 529 Plan, absolutely not.

With UGMAs and UTMAs, probably not, since most families put the money at risk in the stock or bonds markets. With student loans, the only thing guaranteed to grow is the debt, if interest payments are deferred. With the Bank On Yourself method, growth of principal is predictable and guaranteed.

This method also offers a great way for grandparents to contribute. My husband and I have done this for our two grandchildren, who are now 10 and 12. The plan we set up for our grandson is projected to provide about $90,000 for his college education expenses by the time he graduates, based on current dividends. Our granddaughter’s plan is projected to have a value of about $125,000. And if either of them decides to become an internet entrepreneur, rather than go to college, the money could be used to help fund their dream.

About the Author: Financial security expert Pamela Yellen is author of the New York Times best-selling book, The Bank On Yourself Revolution: Fire Your Banker, Bypass Wall Street, and Take Control of Your Own Financial Future. Pamela investigated more than 450 financial strategies seeking an alternative to the risk and volatility of stocks and other investments, which led her to a time-tested, predictable method of growing wealth now used by more than 500,000 Americans. For more information, visit www.BankOnYourself.com.