I am not referring to the traditional, albeit laudable, approaches of writing to your state and federal legislators to at least maintain the current levels of government aid in the form of school and student grants and other subsidies. Even if one could affect public policy, it may not directly benefit your family due to, say, income qualifications.

I am referring to those items entirely in your family’s power and control. These items can have an enormous impact on the ultimate cost and debt incurred (if any). They require unwavering, laser like focus and the long term commitment of the parents and child alike on the ultimate prize; namely, the education of your dreams at the lowest possible cost. These items include:

1. Create the proper incentives with your children. Let them know early and often how much money will be available from family resources for their college education. In effect, your children will be placed on notice that they will be responsible for the balance through scholarships, savings or student loans. These conversations should motivate your child to do their very best to earn scholarships and ultimately make prudent, net cost sensitive college selection decisions (see http://bit.ly/ZpXuf).

2. Academic Achievement…Academic Achievement….Academic Achievement! Schools will “buy” improvements to their US NEWS & World Report College Rankings by awarding academic grants to students that will improve or at least maintain their rankings. From the schools perspective, higher rankings generally translate into greater selectivity, greater pricing power (tuition & fees), more research grants and larger endowments over time. Students, take those AP classes and get great grades!

3. State College Honors Programs vs. Highly Selective Private Schools. If your child has the academic credentials and is accepted into the highly regarded honors program at your state college, paying that in-state tuition can represent a 60% savings. From the perspective of potential employers and graduate schools, degrees from State College Honors Programs are frequently deemed equivalent to those from expensive, highly selective private schools.

4. Get accepted to those colleges with the highest endowments. These highly selective colleges (Ivies, Stanford, etc.) generally have the most financial need based aid available which is awarded based upon generous, transparent financial aid formulas. Further, the admissions selection process is (financial) need blind.

5. Attend schools that award three year bachelor degrees. These programs represent a 25% savings and will become more common as a result of the economic downturn.

6. Start off at low cost community college for 2 years. This strategy can represent a 40% savings. It will become more of a norm as a result of this economic crisis. Note: many community colleges are now also awarding four year degrees, another attractive option.

7. Reward your children if they graduate early. By taking that extra course each period (at normally no extra cost), a student is able to graduate early. For instance, a new car is a great incentive for the child and is a net savings to the parents (vs. tuition, room &. board). Conversely, penalize your child if they take more than 4 years to graduate which, unfortunately, has become the norm.

8. Women: consider majoring in engineering. Women represent only 20% of engineering majors. Schools are attempting to attract more qualified women into engineering (and the sciences) with significant scholarship funds. Biomedical and chemical engineering are particularly attractive.

9. Specialize in sports where the NCAA permits more scholarships per starter. For instance, the NCAA only allows 9 scholarships for Division 1 Men’s Soccer or .82 scholarships per starter). With often 30 players on a college team, soccer coaches frequently “stretch” there soccer budgets by awarding partial scholarships to players on the rooster. On the other hand, football offers 88 scholarships (mostly full scholarships) and there are 22 starters, or approximately 4 scholarships per starter.

10. Parents: Do your part! Maximize the funds available to your children by saving early and often on a tax advantaged basis. You need to develop an optimized college investment plan from the thousands of available of investment options from 529 Plans, Education Savings Plans (Coverdell Plans), etc.

If you need professional, independent advice, try www.401kid.com which parents and financial advisors like you use to obtain optimized, unbiased investment and financial aid advice.

Please let us know what you would like to see from 401kid!

Making your education dreams come true,
Bob Lally
401kid, Inc. COO
(father of a current college student + a recent college graduate)

401kid, Inc. provides unbiased, college financial planning advice via www.401kid.com where families and advisors can optimally fund education dreams with superior a) conflict free asset allocation and financial aid advice; b) a comprehensive ’supermarket’ of education savings investment options; c) savings discipline opportunities for building client wealth; and d) value added content integrated with social networking

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Not that talk! I am referring to the kitchen table talk about going to college and how much family resources will be available.

It is important for you and your child to be on the same page financially. Ideally, there will be multiple talks starting early in your child’s high school career or even late in their junior high years.

The talk goes something like this:

“Honey, we want to do everything we can to put you on the best possible path for life. That will be involve going to college and we want to make that happen for you.”

“As you know some colleges are very expensive. Just so you know, we saved enough to pay $X per year which will cover the expenses of approximately y% of the cost of an instate college. To make this work, you will be responsible for the rest through scholarships, your savings or student loans”.

“It is important that you do everything you can to become an attractive scholarship candidate to colleges by achieving your very best in school and sports. In many cases, you will have to apply for scholarships and they are often awarded on a first come, first serve basis. Therefore, you need to be diligent and timely.”

“Again, we are on this journey together. We want to help you make your dreams come true. We would love it if you graduated with little or no student loan debt. Please keep the communication lines open with us. We can do this!”

A talk like this goes a long way to extablishing expections and making clear to your child that they have “skin in the game” (i.e., their action or inaction will directly determine the amount of student loan debt they will have upon graduation). Talks like this will also properly incentivized your child.

In terms of student loans, please be aware that the Stafford Loan (i.e., loans that the student is totally responsible) limit is “only” $31,000 (aggregate). This covers the cost of only one year’s attendance at many colleges. Then “parent loans” (i.e., PLUS Loans) are required. (Note: a $57,000 Stafford Loan limit is available if the parent does not qualify for PLUS loans due to substandard credit scores – see http://www.finaid.org/loans/studentloan.phtml).

As a parent, what should you do now? You need to uphold your end of the bargain. You need to develop an optimized college investment plan from the thousands of available of investment options from 529 Plans, Education Savings Plans (Coverdell Plans), etc. Incorporating an optimized financial aid plan is a critical component of the process.

If you need professional, independent advice, try www.401kid.com which parents and financial advisors like you use to obtain optimized, unbiased investment and financial aid advice.

Please let us know what you would like to see from 401kid!

Making your education dreams come true,
Bob Lally
401kid, Inc. COO
(father of a current college student + a recent college graduate)

401kid, Inc. provides unbiased, college financial planning advice via www.401kid.com where families and advisors can optimally fund education dreams with superior a) conflict free asset allocation and financial aid advice; b) a comprehensive ’supermarket’ of education savings investment options; c) savings discipline opportunities for building client wealth; and d) value added content with social networking.

It’s a 401(k) for Kids:

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New IRS regulations now allow enrollees to change their investment strategies twice a year. Have you taken advantage of this change in light of the financial crisis? If you have not, you should!

Unfortunately, many 529 Plan enrollees have suffered significant investment losses because they, or their advisors, did not know what the enrollees owned. They violated a golden rule of investing.

Age-based portfolios are NOT labeled in terms of their risk tolerance (conservative, moderate risk, aggressive, etc.). While all age-based portfolios reduce risk by automatically shifting a higher percentage of assets from stocks into bonds and cash as the student beneficiary nears college age, there can be significant differences among portfolios in their equity allocation at a given age. The age-based portfolios with relatively high equity allocations underperformed, significantly in some cases, during this financial crisis.

Also consider the investors in the Oppenheimer Core Bond Fund (see OppenheimerFunds Probed by States on 529 Plan Losses). State of Oregon officials said “Oppenheimer Core Bond Fund was supposed to be a conservative investment, designed for students in college or planning to go to college within one to three years. Instead, OppenheimerFunds put the money into a hedge- fund-like investment fund that took extreme risks in a search for speculative large returns”.

What should investors do now? Investors should optimize and rebalance your portfolio consistent with your time horizon (i.e., when you need the funds) and your risk tolerance (i.e., conservative, moderate risk, etc.). Above all else, know what you own!

If you need professional, independent advice, try www.401kid.com which investors like you use to obtain optimized, unbiased investment advice.

Please let us know what you would like to see from 401kid!

Making your education dreams come true,

Bob Lally
401kid, Inc. COO
(father of a current college student + a recent college graduate)

401kid is an unbiased, independent internet SEC Registered Investment Advisor where families and advisors can optimally fund education dreams at www.401kid.com with its superior a) conflict free asset allocation and financial aid advice; b) a comprehensive ’supermarket’ of education savings investment options; c) savings discipline for clients; and d) value added content with social networking.

It’s a 401(k) for Kids:

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Times are tight. How are we Americans to deal with the recent loss of savings and rising cost of living, on top of the already-challenging demands of every day life? Whatever, your situation, being organized and intelligent about your personal family finances is essential. Are you currently using Quicken or Microsoft Money to do so? How often do you balance your checkbook? If you are using software tools consistently, excellent – that means you are committed to organizing your finances. I have something even better for you though. I recently signed up with Mint.com, a free web-based money management tool. There are a few other similar programs, including Wesabe, Geezeo, and Dimetracker.com, which I haven’t used, so I cannot speak for them. After 16 weeks of use, I am a huge fan of Mint, and here is why.

1. Ease of Use: Within 10 minutes, I setup my Mint account, and added several bank, loan and investment accounts, including a business expense account. I’ve written another entry in the Blueliner Marketing blog about how Mint.com defines the best of web 2.0.

2. Intelligent Categorization: Mint automatically categorizes your transactions pretty accurately. In another 30 minutes, I was able to customize categories and reassign vendors to new categories. The ability to add tags and rules on any expense is fantastic, empowering Mint to better recognize and bucket expenses properly in the future.

3. Simple Budgeting & Spending Trends: Using Mint’s Trend Charts, I was amazed by how much money I spent “eating out” at restaurants! I was also able to see how my spending in certain categories compared to others in New York, where I work. Within 10 minutes, I setup monthly budgets on specific categories, like eating out, groceries and transportation. At any point throughout the month, when I login, my Mint Dashboard shows me if I’m on or ahead of pace on my budgets, which helps me make adjustments. Where do you think you may be spending beyond your means? Have you ever broken out the interest portion of your credit payments to see what they’re really charging? Mint can help you do that. Whether you are experiencing hard financial times or not, tracking budgets and viewing your spending trends will help you make good decisions.

4. Aggregating Accounts: I know that this may not be a time that you want to look at your investment accounts, but one thing is for sure – having all of your accounts aggregated in one interface has never been this easy. If you are using 401kid’s ESP Wizard to get advice on the best 529 Plans and Coverdell ESAs, now you can add those accounts to your Mint dashboard to track them.

So how does this apply to parenting and your children’s future? Well, Mint could be an extremely useful tool for educating teens on money management. I would even argue that kids should be exposed to real world numbers as early as 9 or 10 years old. You could add your children’s debit cards and college savings accounts to your Dashboard and tag expenses related to education or your kids. For example, tags like “video games”, “soccer team”, “books” and “school supplies” will give you a good indication of how much you are investing in these areas. Mint’s blog publishes an interesting article about family budgeting.

Further, by setting budgets with your kids, encouraging them to use pre-paid debit cards and saving receipts from cash spending, you will achieve invaluable benefits, including:

1. Facilitating the financial education of your kids, something that they won’t learn in school – not even in college! Why K-12 and college education do not teach more practical life skills like personal finance is a whole other matter, which we will address another time.
2. Monitoring their spending, which is much easier through Mint than online banking or reviewing paper bank statements.
3. Developing the qualities of self-sufficiency and responsibility, by having them track their own budgets, from whatever they ‘earn’ through work or allowance. They will learn the true value of the dollar when the see how easily it flows out – for example “wow, we spent $1,500 on video games and toys last year?” Also, to see how their own credit accounts charge interest can be a painful and useful lesson – the earlier learned, the better.
4. Sharpening their real world math skills. Now you have an answer to the age-old question of young students in Algebra classes – ‘how am I ever going to use this stuff in the real world?’

I can think of 100 good reasons why you should use Mint or one of the other noted web-based money management soultions, to not only organize the family finances but also to provide what is probably the third most important area of non-formal education that is essential for your children’s development – behind 1) character education and 2) health education.

So what are you waiting for? Get on Mint and report back. I’d like to hear from parents and teens who are using Mint particularly as a mechanism to educate kids on money management.

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