Saving for college is often a priority for the parents - as it should. But to save the school does not give moms and dads license to disregard the rest of their financial goals, advisers say.
According AllianceBernstein Investment's "College Savings Crunch," a recent report that the trends measured college savings, 70% of families surveyed do not have a plan that takes into account all their financial goals. AllianceBernstein is a global asset management firm based in New York.
Melissa Osuch has seen first-hand evidence of these results.
"In talking with other moms and their fellow parents, I realized they had no idea what their priorities should be and when they should start. A lot of times they do nothing, "said Osuch, a Glenview-based financial planner and strategic educator with the advisers of Illinois. When they do act," so they focus on planning college they completely ignore retirement planning. "
And the immediate, the needs and desires of their families often receive more attention than a college savings. AllianceBernstein the investigation revealed that the intention of families to finance at least part of their children's education, 58% have spent more than eating or ordering to bring food to save college of the year past, while 49% spent more on vacation.
For Vicky de los Reyes, 38, who lives in the Chicago suburb of Hawthorn Woods, buying a house was the priority when his eldest daughter was young. She and her husband have started saving for all their children college expenses around the time of her oldest turned 6.
Even if the couple began saving for the education of their daughter later than they would have liked, they have a catch-up strategy: When their youngest child no longer needs day care, the money saved will be their child oldest college fund.
To help parents prioritize their finances, Osuch has a formula: The most important component is the protection and insurance, followed by the establishment of an emergency fund, retirement savings and then Finally, socking away money for college.
Rick Brooks, a financial planner in Solana Beach, California-based Blankinship & Foster, has a similar approach.
"The way we tend to look at financial planning is primarily covering the risks," he said. Young families, it is working successfully are generally professionals in their 30s and 40s with high levels of education on their resumes - but are often left scratching their heads when it comes to creating a financial plan for the family .
Here are five errors financial advisers often see parents make:
1. Buying a bad life insurance - or not at all
It does not cost a bundle for parents in their 20s or 30s to buy life insurance. But this may mean that the world of parent bundle of joy. A working parent can have life insurance through an employer. You do the math and make sure it's enough.
According Osuch, there are two ways one can estimate how much life insurance to buy: Either multiply by eight revenues or income to increase by six, then add all at once, like a full refund of a mortgage or pay for college. It is also possible to estimate how much considering only the costs - both one-time costs and living expenses for several years - instead of income, said Brooks.
Both stress, however, that each situation is unique and it is best to consult a professional on the amount of insurance is required.
Also pay special attention to the stay-at-home mother, Osuch said. Often, a parent who does not have an income figures that he or she does not need life insurance. But large child care expenses could occur if a stay-at-home mother dies, "she says.
Sales at how much a stay-at-home mother needs life insurance, to estimate the cost of replacing the work that the parent does, "she says. The figure is likely to vary depending on the age of children in the family.
Having enough life insurance is particularly important for young families to consider, especially since they are more likely to have a cash flow tighter, said Cicily Maton, a financial planner and partner of Chicago - Aequus based Wealth Management Resources.
At the age of 28, Osuch bought itself over 30 years, $ 250000 term policy for $ 165 per year. Life tables have changed since 1998, when she bought the policy because of the increase in life expectancy, thus reducing the rate even more, "she says.
2. Forgetting the need for disability insurance
Perhaps even more important than life insurance is for parents to have disability insurance, Osuch said. "If you are in a car accident, there is more than a chance that you are going to be injuries that will kill this," she said. "Life insurance is not going to help you there."
Fortunately, this cost can be as modest; Osuch recently sold a 36-year policy of disability insurance for $ 34 per month.
When you decide to buy a lot of insurance, parents should aim to replace at least 60% of their income. Disability insurance is usually paid on a monthly basis.
Incidentally, do not skimp on liability insurance, said Brooks. Inadequate auto and home coverage is a common mistake throughout its customer base.
3. Report of a desire
Young parents often feel healthy and do not think they need to prepare for the inevitable by writing a will. But it is a task that they should probably not be rejected.
"Young people do not have a death on their minds," says Maton, at least not to the same extent that customers are older. But it takes only one horror story about the consequences of a mother dying without a will to change the perspective of someone, "she says.
Without a will, the state decides who cares for children of the deceased and who manages its finances. When parents put their wishes in writing, they make those decisions on the spot.
If find money for attorneys' fees is the biggest obstacle, at least have a conversation with aunts, uncles and grandparents as to who will be responsible for taking children in the event of death of parents happens, "said Brooks. And to make those decisions in writing.
"If this money is tight, at least spend 10, 15 bucks at the store stationery and fill in the blanks," he said, referring to the willingness premade documents. Remember that the notarized document, he added.
4. Forgetting to save for retirement
"When you are young and you have children, retirement seems so elusive," said Osuch. "It's something that you can do tomorrow."
But delaying retirement savings, it is more difficult for a nest egg to grow. And remember college savings can be supplemented by student loans. "There are many ways to finance college, but nobody will give you a loan for retirement," she said.
Négligeant as retirement savings is not a favour for older children, which could be faced with the financial burden of their parents in later life, Maton said. At the very least, people should keep more money in their 401 (k) and that their companies will match, Osuch advises.
5. Putting off saving for college
Putting college while saving for retirement, Osuch said, starting early allows more time for the fund to grow. But spend less money to the school rather than the pension fund.
For example, if someone has $ 100 per month to save, he or she should save $ 75 in a kind of retirement plan and $ 25 in a college savings, she said. "Most people do the opposite, or do not put anything into retirement at all."
But even if the financial aid can complete college savings, do not count on receiving aid that does not need to be reciprocated.
"Fifty-six percent of the financial assistance is in the form of loans," said Jennifer DeLong, director of college savings plans for AllianceBernstein. "People hear" financial aid "and they think" ' free money. "
And although it is easy for parents proud of their prodigy in the image of a star athlete or as coveted artist, do not plan their funding on their entire education scholarship with the money.
AllianceBernstein in the study, two-thirds of the directors of financial aid said they believe that the scholarships and grants are fewer dollars available for the average family today than they have been in the past , 92% said that parents tend to overestimate the amount of scholarship and grant them the money Children will receive.
According AllianceBernstein Investment's "College Savings Crunch," a recent report that the trends measured college savings, 70% of families surveyed do not have a plan that takes into account all their financial goals. AllianceBernstein is a global asset management firm based in New York.
Melissa Osuch has seen first-hand evidence of these results.
"In talking with other moms and their fellow parents, I realized they had no idea what their priorities should be and when they should start. A lot of times they do nothing, "said Osuch, a Glenview-based financial planner and strategic educator with the advisers of Illinois. When they do act," so they focus on planning college they completely ignore retirement planning. "
And the immediate, the needs and desires of their families often receive more attention than a college savings. AllianceBernstein the investigation revealed that the intention of families to finance at least part of their children's education, 58% have spent more than eating or ordering to bring food to save college of the year past, while 49% spent more on vacation.
For Vicky de los Reyes, 38, who lives in the Chicago suburb of Hawthorn Woods, buying a house was the priority when his eldest daughter was young. She and her husband have started saving for all their children college expenses around the time of her oldest turned 6.
Even if the couple began saving for the education of their daughter later than they would have liked, they have a catch-up strategy: When their youngest child no longer needs day care, the money saved will be their child oldest college fund.
To help parents prioritize their finances, Osuch has a formula: The most important component is the protection and insurance, followed by the establishment of an emergency fund, retirement savings and then Finally, socking away money for college.
Rick Brooks, a financial planner in Solana Beach, California-based Blankinship & Foster, has a similar approach.
"The way we tend to look at financial planning is primarily covering the risks," he said. Young families, it is working successfully are generally professionals in their 30s and 40s with high levels of education on their resumes - but are often left scratching their heads when it comes to creating a financial plan for the family .
Here are five errors financial advisers often see parents make:
1. Buying a bad life insurance - or not at all
It does not cost a bundle for parents in their 20s or 30s to buy life insurance. But this may mean that the world of parent bundle of joy. A working parent can have life insurance through an employer. You do the math and make sure it's enough.
According Osuch, there are two ways one can estimate how much life insurance to buy: Either multiply by eight revenues or income to increase by six, then add all at once, like a full refund of a mortgage or pay for college. It is also possible to estimate how much considering only the costs - both one-time costs and living expenses for several years - instead of income, said Brooks.
Both stress, however, that each situation is unique and it is best to consult a professional on the amount of insurance is required.
Also pay special attention to the stay-at-home mother, Osuch said. Often, a parent who does not have an income figures that he or she does not need life insurance. But large child care expenses could occur if a stay-at-home mother dies, "she says.
Sales at how much a stay-at-home mother needs life insurance, to estimate the cost of replacing the work that the parent does, "she says. The figure is likely to vary depending on the age of children in the family.
Having enough life insurance is particularly important for young families to consider, especially since they are more likely to have a cash flow tighter, said Cicily Maton, a financial planner and partner of Chicago - Aequus based Wealth Management Resources.
At the age of 28, Osuch bought itself over 30 years, $ 250000 term policy for $ 165 per year. Life tables have changed since 1998, when she bought the policy because of the increase in life expectancy, thus reducing the rate even more, "she says.
2. Forgetting the need for disability insurance
Perhaps even more important than life insurance is for parents to have disability insurance, Osuch said. "If you are in a car accident, there is more than a chance that you are going to be injuries that will kill this," she said. "Life insurance is not going to help you there."
Fortunately, this cost can be as modest; Osuch recently sold a 36-year policy of disability insurance for $ 34 per month.
When you decide to buy a lot of insurance, parents should aim to replace at least 60% of their income. Disability insurance is usually paid on a monthly basis.
Incidentally, do not skimp on liability insurance, said Brooks. Inadequate auto and home coverage is a common mistake throughout its customer base.
3. Report of a desire
Young parents often feel healthy and do not think they need to prepare for the inevitable by writing a will. But it is a task that they should probably not be rejected.
"Young people do not have a death on their minds," says Maton, at least not to the same extent that customers are older. But it takes only one horror story about the consequences of a mother dying without a will to change the perspective of someone, "she says.
Without a will, the state decides who cares for children of the deceased and who manages its finances. When parents put their wishes in writing, they make those decisions on the spot.
If find money for attorneys' fees is the biggest obstacle, at least have a conversation with aunts, uncles and grandparents as to who will be responsible for taking children in the event of death of parents happens, "said Brooks. And to make those decisions in writing.
"If this money is tight, at least spend 10, 15 bucks at the store stationery and fill in the blanks," he said, referring to the willingness premade documents. Remember that the notarized document, he added.
4. Forgetting to save for retirement
"When you are young and you have children, retirement seems so elusive," said Osuch. "It's something that you can do tomorrow."
But delaying retirement savings, it is more difficult for a nest egg to grow. And remember college savings can be supplemented by student loans. "There are many ways to finance college, but nobody will give you a loan for retirement," she said.
Négligeant as retirement savings is not a favour for older children, which could be faced with the financial burden of their parents in later life, Maton said. At the very least, people should keep more money in their 401 (k) and that their companies will match, Osuch advises.
5. Putting off saving for college
Putting college while saving for retirement, Osuch said, starting early allows more time for the fund to grow. But spend less money to the school rather than the pension fund.
For example, if someone has $ 100 per month to save, he or she should save $ 75 in a kind of retirement plan and $ 25 in a college savings, she said. "Most people do the opposite, or do not put anything into retirement at all."
But even if the financial aid can complete college savings, do not count on receiving aid that does not need to be reciprocated.
"Fifty-six percent of the financial assistance is in the form of loans," said Jennifer DeLong, director of college savings plans for AllianceBernstein. "People hear" financial aid "and they think" ' free money. "
And although it is easy for parents proud of their prodigy in the image of a star athlete or as coveted artist, do not plan their funding on their entire education scholarship with the money.
AllianceBernstein in the study, two-thirds of the directors of financial aid said they believe that the scholarships and grants are fewer dollars available for the average family today than they have been in the past , 92% said that parents tend to overestimate the amount of scholarship and grant them the money Children will receive.
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