Greensboro, NC -- It's back to school week on 2 Wants to Know. And we know school can be expensive: supplies, books, technology, and then there's college! Parents need to start saving early. The question becomes how?
That's where Certified Financial Planner Matt Logan comes in.
He started by going over the basics.
How do you save for college? Logan said it can vary slightly depending on your situation, but for most folks a 529 is the way to go to begin building up funds for your kids to go to college. A 529 is a plan that allows you to contribute funds for education
If you have a young child, the best thing you can do is begin putting money away for them little by little. Start a 529 for them and begin putting something so that you can start to build that account. It is not a quick process. When the child is young, you can afford to be a little more aggressive with the funds as you have a longer time frame to work with.
If your child is in middle or high school you can begin to get a better idea of what you can expect from them in their education. Again, if you have not started a college savings plan it is still not too late. Many parents forget to review these accounts, so be sure you are reviewing them annually so that you can lower your risk as you get closer to the time you will need that money. Some people who had kids starting college in 2008 had a rude awakening when these accounts lost a lot of their value. Make sure you stay on it and have an appropriate allocation for your time horizon with these college accounts.
So what happens when your child is old enough to go to college? How can parents teach their young adults to be responsible with their money? Logan said, "If your child is going to college and you have not spent any time discussing financial concepts, now is the time to take the plunge." He recommended a financial meeting with your child to discuss finances. Make sure they know what you are expecting of them and what they can expect from you financially. Build out a budget along with them. This is really one of those teaching opportunities for a parent. He recommends that kids in college have some sort of employment, even if you have the means to pay for them not to work. Some of the harder situations he's seen are when people graduate from college and this is the first time they have ever searched for employment of any type.
Should parents limit what their children have -- like only keeping one account -- like a debit card? If your college freshman does not already have a bank account, it is time to open one. Make sure that you help them with online access and that there is an overdraft protection feature. Make sure that it is at your same bank if at all possible. As much as you don't want to, there will most probably be a time when the student needs money quickly and you can transfer it into their account.
So how do you teach them to handle the credit card? Many adults still don't know! Logan said, "Credit cards are tough. We always tell people that if you are using one, make sure that you pay it off every month." One big point here is to make sure that there is a low limit on the credit card so that you can limit the danger they get in. They are adults and they can go open their own credit card accounts now, but I would make sure to encourage the student not to open multiple credit lines with retailers or multiple cards.
WFMY News 2