Gen Z wants to Save $: Lessons from #AmericaSavesWeek

Times are changing! It was an exciting #AmericaSavesWeek Feb 27-March 4 and much was learned. Check your socials for #ASW17 or #ASW2017 for loads of financial wisdom and motivation from a variety of institutions. If you ever wonder if it’s making an impact, remember a new generation “Gen-Z” grew up in the “Financial Crises” era with a different view  of money not seen since the Great Depression, so get ready to roll out even more financial literacy content to support their goals and share prosperity!

A study from the Gild featured on Marcomm.com explains:

“Yet Gen Z were shown to be a generation of savers having grown up post-financial crash, with 25% saying they would rather save for the future than spend money they don’t have and 22% saying they never spend on “unnecessary, frivolous things” because saving is so important. These attitudes were shared with the Silent Generation, with 43% and 25% of respectively.”

The study also notes that this is a generation that grew up with the internet and is accustomed to information being made available quickly on any modern device. It’s a long way from the dial-up modem days!

Feel old yet? THINK AGAIN! Traditional institutions like banks, credit unions, educational non-profits and 529 providers are in position to grow using a combination of new technology and time tested wisdom already present in your culture.  Technology is more socialized with Gen Z to where expectations for simple online tools has grown. They have goals and want to move forward. Will your organization help or hinder this process? Here’s a few ideas:

What is your narrative? Even if you think your organization doesn’t have one, or maybe it’s to “maximize shareholder value” (No small feat), your group’s goals are a piece of the greater story Gen-Z is living through.  Are you helping them get where they want to be? If the answer is a resounding “YES” then stick to it and continue to empower Gen-Z with your traditions adapted up to new technology.  Yes, you can promote financial literacy to a new generation of savvy savers and they want to engage your organization to do so!

Your content can provide both sides of the story: Let’s face it, it’s a noisy environment on social media. There appears to be a storm in every news cycle, and the cycles are happening faster than ever!   The good news is your organization does not need to pick sides on hot media topics (Education, Healthcare, Government are astoundingly media driven at times), it just needs to know both sides of the story.  If you are sticking with a principled narrative, you help people guide themselves through any situation using your concepts and ideas. Gen Z is very aware that a single story may be interpreted in many different ways, so instead of pushing an agenda, keep it simple and show both sides of the story while promoting honest dialogue.  Keep your comments section open to allow different views to participate and communicate perspective on your content.

Help with decision making first: There’s a lot of options! We’ve learned this first hand at Invite Education with software covering the financial variables related to college attendance. With over 4,000 institutions of higher learning plus a huge scholarship database, the best thing we can do is provide transparency and financial literacy fundamentals to help families make smart decisions.  We realize there is no perfect “one way” for everyone, so we take a “Consumer Reports” approach to the question of college choice.  This way anyone can use the resources and find what they need.  Just let people make their own personal decisions with your organization’s assistance.  This is far removed from the days of pushing product first on radio or tv.  It’s about targeting the goals of your audience first and providing value with products/services supporting those goals featured second.  Gen-Z is ready to move their life forward, are you ready to help?

Learn more about Invite Education; Subscribe to the Youtube Page for great interviews, college planning advice and more.

John Hupalo on college planning solutions with “The Opening Bell” WGN Chicago

Families putting together college plans are looking at different avenues to find success.  John joined The Opening Bell to share some insight from the book “Plan and Finance Your Family’s College Dreams“, helping families get through the planning process.

  • Starting early on savings will reduce the need to borrow in the future.  There’s 529 programs in place with creative ways to hit savings goals over time. Consistent long term savings combined with any gifts can really grow.
  • College value is different for every family. Be realistic, rather than pessimistic or optimistic.  The planning process has many little steps involved to determine the right fit school considering everything going on in a young person’s life.
  • During election season, we hear ideas about “free” college and student loan debt forgiveness being made more widely available.  At the end of the day, college choices come down to individual decisions based on personal goals and needs. Real solutions are not easily found through claims made during elections.

Check out the full recording beginning @ 19:43 on WGNRadio.com

 

Invite Education co-founder Peter Mazareas talking college affordability on Plan Stronger Radio

Peter Mazareas joined Plan Stronger Radio with host David Holland to cover the topic of college affordability, a major issue faced by many families, especially this time of year.

Peter covers some critical topics by sharing his wisdom and expertise, especially important for families approaching this challenge:

  • College planning is recognized equally with retirement planning given the size and scope of the process.
  • How can families simplify college planning given all the financial variables?
  • What can be done to increase college options and reduce debt dependency?
  • What are some smart strategies that can help with college savings?
  • How the new book “Plan and Finance Your Family’s College Dreams” helps families every step of the way from early planning to graduation.

Interview: Invite Education CEO John Hupalo on @KDURradio: “Plan and Finance Your Family’s College Dreams”

Rachel Frederico host of “Off the Rim” at Fort Lewis College Community Radio (@KDURradio) interviewed John Hupalo on the topic of college costs, savings and student loans, providing insight from the new book “Plan and Finance Your Family’s College Dreams.” The interview covers many topics including:

  • How college financing is a holistic planning process covering the years of early childhood leading up to high school graduation.
  • Why 529’s are so advantageous.
  • Translating the “lingo” of the college funding process into plain english.
  • What is a Gap Year and why it matters before college?
  • How can students and parents best manage college loans?

Check out the full recording:

 

How do I save for retirement AND college?

Finding balance between retirement savings and college savings represents a challenge most families need help managing. If you feel overwhelmed, you’re not alone. Consider some eye-opening statistics from Roger Michaud’s recent article “Financing Education is a Retirement Issue “

  • When it comes to financing a college education, 21% of parents would delay their retirement and 23% would withdraw money from their retirement account to help fund college
  • 94% of parents believe college savings will impact their ability to save for retirement
  • 56% of parents with children in the home are currently saving for retirement

The struggle is real, especially when parents would actually withdraw from their retirement savings to help fund college. Early withdrawals face taxes plus potentially a 10% early withdrawal penalty making it less of a financial plan and more of a knee-jerk reaction.

find your balance photo-1444312645910-ffa973656eba
Find Your Balance

Why? Let’s consider the circumstances. Retirement is most often cited as a goal for long-term savings, but the rise in college costs has emerged as a financial challenge as well. Retirement planning extends beyond the typical 18 years leading up to college attendance, and parents may have started saving for retirement before they got married and had kids, giving them a head-start. This creates a false sense of security where a parent may simply feel comfortable pulling money for retirement to help fund their child’s college dreams, but this is unsustainable. Here’s how families successfully manage both.

Start with retirement savings: Securing your long-term financial goals puts you in best position to help your children over time without unnecessary financial sacrifice. Every dollar counts, and the tax benefits provided by Traditional and Roth IRA’s, 401(k) and 403(b) really help long term savers. While you cannot predict the future of your child’s academic plans, you do know and understand your own future financial needs better than anyone else. Once you’ve mastered your retirement plan you can more confidently pivot the remaining income towards college savings.

Play the long game with college savings: Take a big picture perspective, developing your patience and putting value on consistency. This is a relaxing exercise far removed from an overly busy day-to-day life, so enjoy it and you’ll thank yourself many years down the road. Stay motivated by reviewing savings progress as consistently as you would review your child’s report cards every semester / quarter. You’ll notice that as the savings grow, your child’s academic progress will help you zero in on admissions criteria for various colleges, further motivating you to stay the course. Maintain active engagement by using simple online tools like Invite Education’s Passport for Success that outlines college savings and academic planning all on one platform.

Enfranchise your child: Help your child develop their role as an active saver for college. During the key early years, its expected parents and perhaps relatives will make the lion’s share of deposits in college savings accounts. Once the child begins some part time work, have a portion of those earnings added to the college savings account to help them get involved. This helps develop an all-important habit of saving, a key lesson often overlooked but sorely needed for financial literacy education.

Forecast Financial Aid: Savings are accounted for as part of financial aid eligibility calculations, but the way the money is saved makes an impact. For example, cash in a checking account in the student’s name can weigh against financial aid eligibility by as much as 20% of full value on the Free Application for Federal Student Aid! There’s a better way. If you’re worried about financial aid eligibility, just remember;

  • It’s cheaper to save long term than to borrow and pay back loans later
  • On the FAFSA (Free Application for Federal Student Aid) money saved in a 529 plan owned by the parent is weighed against financial aid eligibility at 5.64% of full value, a great reduction from cash found in a checking account.

In other words, college savers are not punished for their efforts. It’s the income from work declared on the FAFSA that can reduce financial aid eligibility more dramatically. Always use a financial aid estimator to forecast and plan ahead, but you may quickly determine that your income would remove eligibility for Pell or State based grants. This reinforces the need for college savings with an early start date to allow greater time to compound, putting your family in better position to handle college expenses as they arrive. This is especially important for families considered “middle class” as they may have just enough income to reduce financial aid eligibility, but lack the actual cash to pay college outright. A dedicated college savings strategy is critical in such cases.

Early college savings strategies for children

Parents are inspiring their kids to learn financial literacy with a simple message: save for college! It’s a worthwhile goal helping to build healthy financial habits for life and also to reduce the need for student loans in the future. Here are some ways that parents can help their children get on the right track early and stay the course.

  • Learn by doing: The number one way for students to begin saving early for college is to actually do it. The very act of taking money and putting it into a specific account for college savings is instrumental, not just for growing education funds but also learning a healthy financial habit for life. For early savers, it’s simply a matter of motivation.
  • Encourage financial literacy: Embrace financial literacy and learn about money: how to save it, how to spend it, and how to make it work for you. Even with digital money and payment platforms becoming more common, parents can begin to encourage their children to understand financial literacy by explaining about the different coins and dollar bills, and help them put money into a piggy bank or a savings account. As they mature, you might begin talking to older children about investments and different kinds of savings. The key is to have open conversation about personal finance, so that kids learn early that money is something to be managed properly. If that didn’t happen for you, it’s never too late to learn.
  • Learn to budget: This is a great exercise for students and parents. Take a week or two to record all of your purchases and see how much you spend. Record all of your income. Categorize your expenses and determine how much of your income can go into savings. Though “expenses” may be limited, kids should get into the habit of doing this so they can manage a personal budget as they mature. The 50/30/20 method of budgeting suggests breaking things into percentages in the categories of fixed costs, financial goals and flexible spending, but there are many ways to do this.
  • Put a percentage of gifts away: Gifts from birthdays and other holidays are great opportunities to boost college savings accounts. The trick is allocating it to savings before it is spent! Put a percentage of each gift into that account and watch the money grow. One of the most fundamental aspects of starting early is that thanks to interest, your money will be worth more years down the line when you need it.
  • Getting a job: The best way to increase income is to make money on a regular basis through work. A student’s first priority, especially in high school, needs to be their education, but flexible jobs give you the opportunity to earn money of your own. Babysitting is a great job for high schoolers, because it’s flexible and families often need babysitters on the weekends. When the kids go to bed, you often can do homework, accomplishing two things in one go. Other jobs that have weekend shifts include being a cashier at a grocery store or convenience store, working in a bakery, working as a golf caddy, or serving in a restaurant. Students with an entrepreneurial streak might start their own dog walking business or make things to sell.
  • Be consistent: Having a good plan in place is important, but what’s more important is putting that plan into action. If you plan to save $100 a month, continue to do that. It’s important to stick with it until it becomes second nature. You’ll be grateful that you did when you approach college and have a sizable savings account to help pay for it.
  • Parents and children work together: Financial literacy brings families together with a shared goal of greater prosperity. Parents can help set up the paperwork for a college savings plan while their children follow through with their consistent plan to earn and save money.  
  • Keep parents or grandparents as 529 account holders: Make sure to maximize savings in relation to potential financial aid eligibility by making the parent (or even grandparent) the account holder of 529 savings. It turns out that savings in a student’s name can reduce financial aid eligibility, by increasing the family’s “Expected Family Contribution” Money in a child’s name (like in checking/savings accounts) is counted as a student asset on the FAFSA, with as much as 20% of it’s value weighed against financial aid eligibility. This presents an unfortunate situation when it comes to college savings and financial literacy; you want your child to learn about saving money, but you also want to get the best value for college savings. There are significant benefits to keeping the majority of college savings in the parent’s name. A 529 in the parent’s name counts as a parent asset, and is assesses 5.6% of its value against FAFSA eligibility, a lower rate than a student asset. This comes into play during the need analysis process, which shelters parents’ assets more than it does those of their children. There are a number of strategies that you can use to maximize your aid eligibility. For students who are saving for college, it could be helpful to have them save the money but put it into this account under the parent’s name. That way, you are maximizing the potential for aid.

The idea of getting students to start saving for college early isn’t just about growing their contribution to their education savings, though that’s important. It’s also about children learning to manage their money and starting off strong so that they can grow up to be independent adults. It’s important because having them pay for a portion of their college costs gives them more ownership over the process because they’re investing their own money. Financial literacy is a skill for life; by starting young, children are are set up for financial success early.

 

3 Key Points for Grandparents Funding 529 College Savings Plans

It’s wonderful to see so many Grandparents participate in college graduation ceremonies, cheering on their grandchildren!  It turns out many grandparents were also able to provide some financial support along the way which minimized their old time photosgrandchildren’s student loan debt.  If you are a grandparent (Or soon to be one) here are a few things to consider when planning to help with college costs using a 529 plan.

  1. Early savings is key: Most grandparents understand the value and importance of savings and compound interest and the resultant benefit to them and their family members of a patient and disciplined strategy.  Saving for college is a great example, since it takes patience to stick with a  college savings plan for young toddlers and children. Grandparents are already well aware that “time flies” all too fast and what is required when making a long term commitment to a financial goal.   By helping to start a college savings plan, grandparents can make a big difference for long term college savings, increasing college options and minimize student debt for their grandchildren.
  2. Utilize the special 5 year 529 gifting rule for estate planning purposes: Grandparents should consider utilizing their estate plans to kickstart college savings.  Up to $14,000/year in 529 contributions can be made without triggering any gift taxes, considering the annual gift exclusion rule from the IRS. Under the special 5 year accelerating gifting rule, grandparents can gift as much as $70,000 contribution to a particular 529 plan beneficiary in a single year, but this would require no subsequent gifts over the next 5 years in order to average out a $70,000 lump sum within the $14,000 guideline.  Utilizing this rule and infusing a large amount now would certainly make a huge difference in the amount available in the future for college tuition.
  3. Be aware of financial aid policy; Use 529 accounts in junior and senior year of college:  Grandparent assets are not directly disclosed on the Free Application for Federal Student Aid (FAFSA) since they are not the custodial parents or the student, obviously.  However, when 529 funding distributions are provided to the student, the money is treated as “income” in the student’s name for financial aid purposes in the year it was received.  This additional income may actually decrease financial aid eligibility for the student as it is weighed even more heavily against need based grants, even more so than income in the parent’s name!  Wise planners simply look ahead and determine if the student would qualify for need- based funding considering the custodial parent’s household income (Like using Invite Education’s financial calculators).  If drawing high disbursements from the 529 accounts would sacrifice financial aid eligibility, then hold off on disbursements until the student’s junior and senior years.  This way the student can qualify for maximum need based financial aid for the early years, and then use the 529 to fund perhaps the entire cost of their last two years of college.  Or the 529 funding could be used to pay for Graduate school, where need based grants are not awarded on the scale of undergraduates. If there is excess funds, the grandparents can change the beneficiary or even take the money back .  No one wants to be punished for savings, so always go back and re-evaluate the funding strategy each year for optimization.

 

Top 5 reasons for 529

April is #FinancialLiteracyMonth offering many reminders about the importance of saving. Thinking about starting a 529? Here’s 5 reasons why the 529 makes an excellent option.

1. It’s cheaper to save than to borrow:  It’s much more than “a dollar saved is a dollar earned” today, as many utilize student loans to cover the rising cost of higher education.  Having to borrow becomes a much more costly endeavor long term, where savings is a more attractive option.  For example, saving $100 per month averaging 4% rate of return compounded annually over 18 years would produce about $31,437.  If borrowing $31,437 at 4%, a 10-year repayment schedule would require monthly payments of $318.28 for a total of $38,194.24 repaid.  The $6,757.24 in interest costs may be a tax deduction in future years of repayment, but it’s clear that a little bit of early savings goes a long way to cover college costs.

2. No income limitations: Regardless of how low or high family income is, there are no income limitations associated with the 529 plan.  This is unlike the Roth IRA, a retirement savings program that is only available for single people making less than $116,000 per year or married couples earning less than $183,000 per year as of 2015.  Savers make saving a financial priority and are not limited by the 529 because of future gains on income.

3. Tax-free growth: Quite simply, 529’s offer a tremendous benefit of tax free growth.  Specifically, all earnings grow free from federal taxes.  Most states conform to the federal tax free treatment with 33 offering state tax deductions

4. Best savings option when considering financial aid: Families concerned their savings may affect their eligibility for need-based financial aid should take a look at the 529.  Ultimately, the way cash is saved is what’s most important. On the FAFSA (Free Application for Federal Student Aid) money saved in a 529 plan owned by the parent is weighed against financial aid eligibility at 5.64%. For example, $10,000 saved in a 529 could end up reducing financial aid eligibility by $564.  However, this is much better than having money in a standard savings account in the student’s name, where it can be weighed against financial aid eligibility by 20%. The 529 provides a superior vehicle for college savings given financial aid regulations for higher education.

5. Great for estate planning: Grandparents are finding creative ways to help fund college for their grandkids while retaining control of their assets as part of their estate.  Money put into a 529 is removed from the taxable estate, but grandparents are able to retain rights of control over the 529 account even when funding is typically used to cover future college expenses for their grandchildren.   Generally, the goal of estate planning is to reduce tax liabilities and provide assets to family members as efficiently as possible.  Under current tax law, you are permitted to gift up to $14,000 per year to another person for any reason without having to pay a gift tax or a generation-skipping tax (GST). This limit is sometimes referred to as the “annual exclusion amount.” With a 529 Plan, however, you are able to make a lump-sum contribution equal to five years of annual exclusion gifts to a beneficiary in a single year. This means that you can give up to $70,000 (if you are single) or $140,000 (as a married couple) at once, per beneficiary, without having to pay gift or estate taxes.

Learn more about Invite Education’s 529 search engine and college savings calculator, helping your institution provide families with savings strategies and grade-by-grade guidance every step of the way.

Request A Demo Today

 

 

 

 

“Reflecting on 20 Years of 529s” with Peter Mazareas: 2016 College Savings Foundation Annual Conference

Invite Education Co-Founder, Peter Mazareas will participate in the opening session of the 2016 College Savings Foundation Annual Conference in Jacksonville, Florida on March 8-10. He will moderate and present in the kickoff session entitled “Reflecting on 20 Years of 529sCollege Savings Foundation Peter Mazareas

The panel of experts will review the evolution of 529 Plans and milestones and assess where
the Industry is today and prospects for growth in the future.   What have been the biggest challenges, successes and failures What can be done differently to increase participation and awareness?

 

The Panelists include:

  • William W. Montjoy, Honorary Chairman and Senior Counsel, Global Education Group
  • Richard A. Davies, Senior Managing Director, Global Head of Defined Contribution and Multi-Asset Business Development, Alliance Bernstein
    • Recently Served as Vice President for Oppenheimer Funds and Director of College Savings Plans

Originally introduced in 1996, a “529” is a tax advantaged savings plan named after the very section of the IRS tax code, authorized by federal law and implemented at the state level.  It was after 2001-2002 that qualified distributions became tax free and popularity for the program soared.  Today, 529’s are widely available, provide a valuable college savings option, and have assets over $220 billion.  However, this only represents a fraction of total educational costs in addition to over $1 Trillion in student loan debt outstanding.

As part of the College Savings Foundation Annual Conference this panel discussion is one of many excellent topics covered throughout the event.

Follow on Twitter for more updates: @InviteEducation