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:

Bookmark :

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:

Bookmark :