Category Archives: Family Finance

How to Invest in ABLE Accounts

In honor of Autism Acceptance Month, Femme Frugality is running a series of Monday articles focusing on the triumphs and challenges those diagnosed with autism conquer as related to their finances and careers.

Joining us for the third post in our series is Tara Falcone, CFP®. Falcone is a CERTIFIED FINANCIAL PLANNER™, former Wall Street analyst, and founder of ReisUP LLC.

ReisUP is an early-stage financial services company dedicated to increasing investing education and access for everyday investors. Her mission is to empower people to “rise up” and play a more active role in achieving their financial goals. 

Totally sending this to my sister! How to invest in ABLE accounts.

A couple of weeks ago, we kicked off our Autism Acceptance Series by looking into a new financial vehicle: ABLE Accounts.

ABLE accounts allow individuals with disabilities, or their guardians, to stash away some money without having to worry about failing an asset test when they go to apply for state or federal benefits. These accounts can also be used to grow your savings tax free.

There are currently nineteen states that offer ABLE accounts. For simplicity’s sake, we’ll be looking at only Pennsylvania’s investment options today, though the same concepts can be applied in generality.

What are ABLE investment options?

The PA ABLE account has the following seven allocation options:

  • High-yield checking account
  • Conservative Investment Portfolio
  • Moderately Conservative Investment Portfolio
  • Moderate Investment Portfolio
  • Growth Investment Portfolio
  • Moderately Aggressive Investment Portfolio
  • Aggressive Investment Portfolio

“The Conservative and Moderately Conservative options invest 70-90% of their portfolios in cash and bonds, with the rest (10-30%) invested in a variety of stocks,” says Tara Falcone, CFP® of ReisUP LLC.

“The primary goal of these investment options is to preserve your principal, which is the money you deposit into your ABLE account, while offering limited to small returns on your investment. Small potential risk equates to small potential reward.

“The Moderate and Growth options’ portfolios are split roughly 50/50 between bonds and stocks. These investment strategies focus less on principal protection and more on generating a slightly higher return on the invested assets. Moderate potential risk means moderate potential reward.

“Finally, the Moderately Aggressive and Aggressive options are invested primarily in stocks (75-90%) with a small portion of the portfolios invested in bonds (10-25%). These options’ primary goal is to achieve the highest growth possible with little regard for principal preservation.”

Figure Out Why and How to Invest

Before making any investment, it’s important to identify why you’re investing, and what limitations your specific life situation may impose. Falcone advises looking at the following factors before choosing your allocation strategy.

Risk Tolerance

Investments are not stagnant. At times they’ll go up, and at others they’ll go down. Your risk tolerance is how much sleep you’ll lose over that fact.

“Generally, more conservative investment options are less volatile, meaning your account balance fluctuates less,” Falcone explains. “However, that also means it’s unlikely to grow as much since less risk yields less reward.”

“Meanwhile, aggressive options typically generate larger investment returns, but also subject your account balance to bigger positive and negative swings. This could put you at risk of not having sufficient funds to cover expenses when you need it.”

Time Horizon

How long can you let your money sit without touching it? That’s your time horizon.

“If a beneficiary needs to access a large portion of his or her ABLE account every year to pay for qualified expenses, a conservative investment strategy is likely more appropriate,” explains Falcone. “If someone in this situation were invested more aggressively, they may discover that their account balance has decreased in a market downturn, leaving them unable to pay for current expenses.”

If, however, you’re saving to provide for your child after you’re gone, you may have a longer investing horizon.

“Someone with a longer investing horizon who doesn’t need to withdraw a large portion of their account for five or more years may want to consider a moderate or aggressive option,” says Falcone.

“The larger growth potential inherent in these investment strategies could allow that person to take greater advantage of the tax-free growth nature of ABLE accounts. In this case, the beneficiary should consider reallocating to a more conservative strategy as the time when they will need to withdraw money from their account approaches.”

Savings Ability

“In theory,” Falcone continues, “the more someone can deposit into their ABLE account every year relative to their expected expenses, the more aggressive they can afford to be from an investment perspective.”

Check out this example with Ella and Ari:

This article is PACKED with helpful info for people deciding how to invest in their ABLE account for people with "disabilities."

 

Overall Goal

There are two basic reasons ABLE accounts are so attractive. The reason you were drawn to it probably says a lot about your overall goal.

Reason #1: Savings isn’t counted for asset tests.

If you’re applying for government benefits like Medicaid or SNAP, savings in your ABLE account will almost never count against you. This is important when you’re trying to build up savings for medical equipment, therapies, or even just a basic emergency fund that you will need in the near future. In these cases, Falcone notes that a conservative approach is probably the best fit.

Reason #2: You’re taking advantage of the tax-free growth.

If you’re saving for your child’s future but don’t have a large enough nest egg to justify a special needs trust, ABLE accounts are particularly attractive due to their tax-free growth. Falcone notes that any time you’re making a longer-term investment, you can afford to be more aggressive.

It is possible that you’re taking advantage of both perks. You’re saving large sums of money for a date far off in the future, but are only able to do so because that savings won’t count against you in an asset test. In these cases, Falcone says you can yet again afford to be more aggressive.

Risk Capacity

While risk tolerance is how you feel about the volatility of your investments, risk capacity looks at the risk you can take on from a concrete, objective perspective.

“Due to the assets test that owners/beneficiaries of ABLE accounts must pass in order to qualify for Medicaid and other social programs, risk capacity is arguably the most important factor to consider in these unique circumstances,” notes Falcone.

“Asset tests often prevent families with disabilities from building substantial emergency funds that could cover expenses temporarily should the ABLE account balance drop in a market downturn. Therefore, even though someone may be comfortable with more investment risk, he or she may not be able to afford being exposed to such risk due to lack of other cash sources.”

If you have friends and family who want to contribute, but you also want to extend your investment time horizon, you may want to direct them to specific bills that they can pay rather than making contributions to the ABLE account.

Falcone points out that this keeps your money in your account as a long-term investment while keeping it out of your regular checking account where it would be counted in an asset test.

How should I invest with my ABLE account?

Wondering what you should do in your specific situation? Below you’ll find Falcone’s recommendations for some common circumstances individuals or families may find themselves in.

While this advice speaks to generic situations, it’s always advisable to talk with a professional about your own, unique set of circumstances before making any investment.

High-Yield Checking Account

  • Someone with no risk tolerance. They are not willing to put any of their funds at risk to earn even a small return.
  • Someone who needs the ability to withdraw funds immediately. Otherwise, withdrawal proceeds can take 3-10 days to reach the beneficiary in Pennsylvania, per the Program Disclosure Statement.
  • Someone who is already the beneficiary of a special needs trust or has some other fund/account/support to help pay for future expenses. They don’t need the benefit of the tax-free growth nature of an ABLE account, but want to shelter more funds from the asset test.
  • A disabled adult with current cash need, desire to shelter some assets from the asset test, and/or desire for some financial independence to purchase/pay for things on their own.

Conservative Investment Portfolio

  • Someone with very low risk tolerance.
  • Someone with no or insufficient emergency fund (i.e. low risk capacity.)
  • Someone with potentially large unexpected expenses.
  • Someone with a present need for cash (i.e. short investing horizon of less than 2 to 5 years.)
  • Someone whose primary goal is to shelter funds from the asset test, not earn a substantial return on those funds.

Moderately Conservative Investment Portfolio

This investor will display similar criteria to Conservative, but is willing to give up some principal protection for slightly more current income.

Moderate Investment Portfolio

  • Someone with moderate risk tolerance and moderate risk capacity.
  • Someone with high risk tolerance and low risk capacity. They’re comfortable with volatility, but can’t necessarily afford to lose money in the short-to-medium term.
  • Someone with low risk tolerance but high risk capacity. They’re not as comfortable with investment volatility, but can afford to take on some risk to earn a potential return.
  • Someone with infrequent but potentially large unexpected expenses.
  • Someone with a medium-length investing horizon of 5 to 20 years–perhaps a parent saving for their child’s future expenses, including education.
  • Someone who wants their money to earn a slightly higher return.
  • Someone who has access to other cash sources or temporary support in the event of a market downturn.

Growth Investment Portfolio

Will display similar criteria to Moderate, but is willing to take on slightly more risk for slightly more capital appreciation potential.

Moderately Aggressive Investment Portfolio

  • Someone with a high risk tolerance.
  • Someone with a high risk capacity (i.e. sufficient emergency funds or other cash/support sources.)
  • Someone with a long investing horizon and desire to benefit most from ABLE’s tax-advantaged growth. This could be parents who want to set aside funds for their child’s future needs and want those funds to earn a substantial return.
  • Someone who already has a special needs trust or is seeking an alternative to a special needs trust. One example is parents with a young disabled child or young adult.
  • Someone who has a low savings capacity now, but a large future capital or income need. One group that may fit this profile is parents wanting to establish a fund to pay for their child’s needs upon their death.

Aggressive Investment Portfolio

These investors will display similar criteria to Moderately Aggressive, but to a larger extent for each point. Even more comfortable with risk, even longer investing horizon, even greater future income or capital need, even more sources of additional support, etc.

Evaluate, but don’t mix and match.

Falcone advises against investing in multiple different portfolios at one time.

“Allocate 100% of your account balance and future contributions to whichever investment option you choose,” she says. “Mixing them changes the overall allocation and therefore the resulting investment strategy. For example, allocating half of your account to the Conservative option and half to the Aggressive option results in a combined portfolio similar to the Moderate investment option.”

She says the only exception would be if you needed some cash on hand in the high-yield checking account, but wanted to invest the surplus.

Falcone leaves us with these final words of wisdom:

“No matter which option you choose, make sure to re-evaluate your choice every year and make appropriate adjustments if your circumstances and/or goals have changed.”

Getting the Most Out of Pregnancy Health Insurance

Holy shoot. I wish I had gotten more out of my pregnancy health insurance now. Spent so much of my own paycheck unnecessarily!

There are a lot of health care costs to manage when you’re expecting. If you have purchased short term disability to cover income while you’re on maternity leave, or hospital indemnity insurance to cover things like hospital admission or NICU costs, you’re likely paying even more.

These policies’ premiums generally aren’t too insane, and it’s common for employers to bring in a salesman once a year to try to sell them to you as a benefit. Depending on your near-future plans they can be a good price/value ratio.

While you’re paying out insurance premiums, make sure you’re taking advantage of every last benefit.  Here are a couple ways to get the most out of your pregnancy health insurance that most expecting mothers don’t think to ask about.

Get Your Breast Pump Through Health Insurance

The ACA requires insurance companies to cover breast pumps. TRICARE and most state’s Medicaid plans also cover this benefit. There are a few private insurers that are still trying to catch up with the law, but odds are your policy should be paying instead of you.

If your pregnancy health insurance policy doesn’t cover a breast pump for you to own, odds are it will cover breast pump rentals.  Especially while you are in the hospital, and especially if you and baby are having feeding problems or any other health issue that is preventing breast feeding.

While it’s great to have coverage, filing even more insurance paperwork while you’re pregnant doesn’t exactly sound like a fun time. Luckily, medical equipment providers will often handle the insurance and prescription nightmare for you. I was so glad for this when I had my kids.

One such medical equipment provider that operates in almost all of the contiguous United States is Aeroflow Breastpumps. They make the process super easy–all you have to do is fill out a single, one-page form.

This video shows you what they do on the back end from there. The fact that they take all of this work off of your plate is a beautiful thing:

Pregnancy Rewards Programs

Many insurance policies also come with rewards programs. These programs are usually set up so that if you’re taking good care of yourself during pregnancy–by doing things like taking your prenatal vitamins and going to all of your doctor’s appointments–you get some type of baby gear.

The three most common things I’ve seen are:

  • a free stroller.
  • a free pack ‘n’ play.
  • a free car seat.

Call and ask your provider if they offer anything like this.  Any one of these items can easily set you back at least $100 if not more, and none of them are the greatest things to buy used.

 

Want more? Check out other potential hidden benefits in your health insurance plan.

 

This post originally aired on Femme Frugality on January 11, 2013. It has been revamped to reflect changes in health care law with the support of Aeroflow Breastpumps.

ABLE Accounts for People with Autism

In honor of Autism Acceptance Month, Femme Frugality will be hosting a series of Monday articles that focus on the financial challenges and triumphs that people with autism face and achieve. When they are children, these things also tend to affect their family’s finances, as well.

Great way to save money with tax-free growth. ABLE Accounts for adults with autism or families with children with autism.

If you are on the autism spectrum, or your child is on the spectrum, it’s likely that you incur some costs that neurotypical people simply don’t. There may be therapies, adaptive equipment, nutritional supplements or even legal fees related to autism that end up in your budget.

Fortunately, in recent years these financial burdens have been acknowledged. With the passage of the ABLE Act, people with qualified “disabilities” or their guardians now have the ability to open an account built specifically to deal with these added expenses.

I was incredibly psyched when an advisor let me know Pennsylvania was rolling out theirs recently. Since PA is the state I’m most familiar with, the PA ABLE account will be the one we dissect today, but other states have similar options. You can view them at the end of this article.

What is an ABLE account?

An ABLE account is a tax-advantaged investment account. It serves as a way for those with “disabilities” to save for expenses related to their condition–in this case, autism. Families are also able to save for their minor children in this way, or through a power of attorney if their child is an adult in need of assistance.

It’s a 529 account, which means the money you put in there is invested. If you’re familiar with these accounts for college savings, it’s a very similar thing except the scope of qualified expenses extends beyond just post-secondary education.

ABLE accounts are also advantageous because they don’t count against many state or federal programs that require asset tests, allowing people on the spectrum to save for future costs without worrying about losing their healthcare or other necessities.

How do you qualify for an ABLE account?

If you live in Pennsylvania, you’ve likely gone through the rigamarole of applying for SSI so you can get on Medicaid. If your income is low enough, you get SSI payments. If it’s too high, you don’t get the SSI payments, but SSI confirms that you have a disability so you can get state-sponsored insurance.

If your autism has been confirmed by SSI, you qualify. Other ways you can qualify are through entitlement to SSDI or a signed confirmation of disability from a physician. They must also certify that you had autism before age 26, which shouldn’t be difficult.

Invest in an ABLE account for your child's autism expenses and watch your savings grow tax-free.

What is a qualified expense for an ABLE account?

In Pennsylvania, qualified expenses are any expense related to the “disability.” That includes:

  • Tuition for school–Pre-K through post-secondary
  • Books and other supplies related to education
  • Mass transit expenses
  • Purchase of a vehicle
  • Modification of a vehicle
  • Moving expenses
  • Job training
  • Expenses related to gaining/maintaining employment
  • Health expenses across the realms of mental, physical, vision and dental
  • Health insurance premiums
  • Durable medical equipment
  • Respite care
  • Therapies
  • Communication services/devices
  • Personal assistance
  • Nutrition management
  • Financial management
  • Legal fees
  • Funeral and burial expenses

In addition, you can use it for these housing-related expenses tax free, though withdrawing money for any of the below may impact your SSI benefits:

  • Primary residence expenses
  • Rent
  • Mortgage payments
  • Property taxes
  • Home improvements or modifications
  • Utilities

This is by no means an exhaustive list. You can use the money for anything related to the associated “disability,” and it doesn’t necessarily have to be deemed medically necessary. Just remember to keep good documentation about what you’ve spent the money on. If the IRS ever audits you, they’re going to want to see receipts.

Check out other qualified expenses under PA ABLE.

How much can I save in an ABLE account?

You can save $14,000 per year. If you have family or friends that want to contribute, their generosity counts towards that $14,000.

The max amount you can have in an ABLE account at any given time is $511,758 in the state of Pennsylvania. This max number will vary from state to state. If you are a parent or guardian who is saving for a child, once you reach this point you may want to talk to a professional about a trust or even a special needs trust.

What are the tax advantages of saving in an ABLE account?

You contribute money after you’ve already paid taxes, so contributions won’t lower your AGI on your taxes. However, the money is allowed to grow tax-free, and as long as your withdrawals are made for qualified expenses, you won’t have to pay taxes when you take the money out.

If you spend the money on an unqualified expense, though, you will be hit with a penalty.

You don’t necessarily have to live in a state to purchase its plan. For example, PA ABLE is available to people in all 50 states–not just Pennsylvania. On this particular plan, you might end up paying state taxes on your gains if you’re from out of state. Pennsylvania residents are exempt, and also won’t pay state taxes upon a qualified withdrawal.

Pennsylvania residents also benefit from exemption from the PA inheritance tax. Check with your state to see what benefits may be available.

Stop worry about asset tests and start building savings with an ABLE account.

Will an ABLE account mess up my state or federal benefits?

ABLE accounts are not considered for SNAP benefits or any other federally-distributed benefits with means-based tests, save for SSI.

Typically, SSI limits your assets to $2,000, but ABLE accounts are a little different. They won’t count the first $100,000 in your ABLE account against you for SSI qualification or the determination of your dollar-amount benefits.

Separately, the state of Pennsylvania has passed legislation that prohibits your ABLE balance from being used in any asset tests related to health or disability. They’re also not allowed to use it for SNAP per the USDA’s issued guidelines.

What about financial aid for college?

In the state of Pennsylvania, PA ABLE savings will not count on applications for state-based financial aid.

Because ABLE accounts are not supposed to be counted on federal means-based tests, the general assumption is that these savings should not be included on the FAFSA. However, as far as can be told the US Department of Education has not issued any guidance on this to date. You may want to call the Federal Student Aid Information Center to get the most up-to-date information.

Do not count ABLE savings on other children’s FAFSA applications.

What are the fees?

You can avoid all administrative fees by getting your documents delivered electronically. Investment fees are between 0.34% and 0.38% depending on which option you pick.

Picking an option–from conservative to agressive–is something we’ll be tackling in a future post. Saving for college with a 529 is one thing, but saving for expenses related to autism that come up as a part of your daily life is quite another all together.

Rent isn’t something you’ll be paying in 30 years–it’s something that’s due now. If you need an iPad to communicate,  you’re not going to wait for 15 years of appreciation on your investment before you start to exchange information with the world.

But that isn’t to say the most conservative option is the best choice each and every time. It’s complex, and something we brought an expert in to cover.

functional fashion modern frugal mom

Are ABLE accounts worth it?

While the fees may not be the lowest, the account is tax-advantaged and allows you to use your money before retirement age. It also allows you to save for future expenses without disqualifying yourself from certain federal and state means-tested benefits.

If you’re a parent, you may not be sure if your child will go to college or not. An ABLE account gives them the flexibility to pursue whatever occupational or educational path they want and are able to when they get to that point in their life.

Or, if you come up against a financial emergency between now and then because of your child’s medical, communication or educational needs, you have the money there to save you from financial distress while still providing the best for your kid.

Overall, it’s a much-needed solution that many individuals and families will be able to use to their advantage. With so many frustrating lines of red tape around every corner, it’s good to see that this issue is getting some recognition and legislation.

Other states with ABLE accounts

Note that not all state plans are created equally. Don’t pick a plan simply because it is based in your state or think that because your state doesn’t offer a plan, you’re not eligible. Fees, residency requirements and state tax advantages are all going to vary. Do further research before opening any financial account.

20 Ways to Save On Your Kids’ College Education

I had zero clue about number 12! So glad I read! 20 Ways to Save on Your Kids' College Education

College is potentially the most expensive line item you will ever pay for in the name of parenthood. As the cost of education balloons, you may be wondering what the heck you can do to stop it.

While you can’t take on the entire higher education industry solo, there are some things you can do to make sure you’re limiting how much money flies out of your own pocketbook. Today we’ll cover twenty ways to save on your kids’ college education depending on which stage of life they are in. To make it easier to find the info you need based on where you are in the college process, here are the topics we’ll be tackling:

What You Can Do While They’re Young

What You Should Do When Your Child is Picking a School

Applying for Aid

Smart Money Decisions at School

While They’re Young


open a 529 account for your childs college education

  1. Open a 529 account.

    If you are already fully funding your retirement accounts, a 529 account can be a great vehicle to save for your child’s education. You contribute with money you have left over after taxes, but your savings grows with interest tax-free, and will not be taxable at the federal level when you withdraw the money as long as you use it for your child’s education.

    Different states have different plans, and in some cases you can purchase across state lines. Do some research to find the best available plan for your situation.

  2. Encourage their interests, hobbies and activities.

    I was talking with a talented financial planner a while ago about college savings. His biggest advice? It wasn’t 529s…because most people aren’t even funding their retirement accounts to the max.

    Instead, he was big on encouraging participation in activities and hobbies. Those will be the things that earn your kid scholarships and get them accepted into a school in the first place.

    We collectively own a looming student loan bubble here in America. We have no idea when that’s going to pop, or what college prices or funding will look like after it does. It’s not impossible that the college financing landscape will change dramatically between what it looks like today and what it looks like when America’s youngest children hit the halls of scholarship.

  3. Teach them how to budget.

    When your child is at college, they may still be relying on the bank of Mom(s) and/or Dad(s). Even if you don’t plan on providing them with a monthly stipend, you’d be doing them a huge favor by teaching them to budget now while they’re still under your roof. It will save everyone involved some cash as it will reduce overspending and potential money leaks.

  4. Take advantage of K-12 incentive programs.

    Some schools offer incentive programs to students just for graduating. For example, Pittsburgh Public Schools has the Pittsburgh Promise which gives students who entered Kindergarten in 2015 or earlier $30,000 for college as long as they graduate high school and are admitted to an accredited institution. If you’re weighing where you want to send your kids to school, incentive programs like these can be what draws the final straw.

    You should be aware, though, that these programs are sometimes subject to change. For example, the classes of 2012-2016 were awarded $40,000 under the Pittsburgh Promise, and there is no guarantee of college monies for those who enter Kindergarten in 2016 or later.

Before Deciding on a School


Pick a college for the best ROI and least debt.

  1. Public vs Private Tuition.

    In general, state schools or public schools tend to have lower tuition rates than private schools. The price difference can be dramatic, and there’s a ton of research out there demonstrating that, over the course of your career, it doesn’t typically matter where your degree came from in terms of salary.

  2. Don’t write off the Ivy League as “too expensive.”

    Ivy League schools, on the other hand, tend to have a high sticker price but generous financial aid thanks to numerous endowments. In these cases, financial aid is sometimes extended to families who make six figures, which could bring attendance costs below that of private, or sometimes even public, universities.

    The Ivy League is the one exception to that salary rule, too—if you’re a minority. While white students don’t see salary bumps thanks to attendance at an Ivy League school if they’re not low-income or first generation graduates, black and Hispanic students do.

  3. Visit the Financial Aid Office on tours.

    You can get a good feel for how much school-sponsored financial aid your child will be able to get simply by visiting the financial aid office on your initial tour of the school.

    For example, the financial aid office at the University of Pittsburgh, perpetually ranked as one of and often the most expensive public school in the country, didn’t even have a binder with scholarship opportunities to look over as of a few years ago. Not only is it notoriously expensive, but it’s also notoriously short on financial aid for its students.

    While Pitt is a fantastic place to get an education, you can find private institutions that charge less and offer more aid. Pitt is just one example, though. Be sure to make the financial aid office a priority when you’re visiting any campus.

  1. Look at foreign options.

    Does your kid want to study abroad? You might want to encourage them to do it for four years. There’s a small movement of students who are relocating to Europe for university, and it’s not just because the idea of studying in France is incredibly romantic.

    Rather, it’s that the cost of tuition abroad can be substantially cheaper. You do have to consider each country and school independently, though. In France, tuition can be had at public universities for as low as $1,000 or less per year. If you look at somewhere like Sweden, however, the costs jump up closer to that of the average American public university.

  2. Community College for the first two years.

    Your student may turn up their nose at this option, but take the time to go over the numbers with them and they may change their mind. If you are a Pell Grant recipient, community college can almost always be fully funded without you dropping a penny out of pocket. Even if you’re not receiving federal grants, one or two scholarships could knock out all of your costs.

    On top of that, your student can stay at home, saving on massive room and board fees. By the time they transfer when they’re a junior, they won’t be subject to the rule many colleges have for their freshman: you must live on-campus in our expensive housing.

    Just make sure your child knows which school they want to go to after the initial two years are up as you want to ensure their credits will actually transfer.

Apply for Aid


Apply for financial aid with Citizen's FAFSA application.

  1. Apply for the FAFSA.

    The FAFSA, or Free Application for Federal Student Aid, is the gateway to almost all other financial aid. It can get you Pell grants (which you never have to pay back,) work-study opportunities, and access to federal student loans (which you do have to pay back.) Schools require the FAFSA to be filled out before awarding your child with school-sponsored aid.

    Filling out the FAFSA can be overwhelming. You will need your tax data as the parent or guardian from the prior-prior tax year. So for the 2017-18 school year, you will need your 2015 return. You can fill the application out for free on the government’s site, but as mentioned, it can be a cumbersome process with little guidance.

    If you want a simpler way to fill out the FAFSA with easy-to-understand guidance, there is help. Citizen.co provides a free and intuitive FAFSA application that makes the whole process less of a headache.

    If you think you make too much money for the FAFSA, apply anyways. The worst that can happen is that you get zero aid. But in years past, there has been money leftover because not enough families applied.

    Even if you don’t qualify for grants, you’re still likely to qualify for Federal loans, which are more often than not infinitely more desirable than the loans you’ll find in the private sector. Besides, if you use Citizen, applying is going to be easier than you anticipated.

*Note: Be wary of services that charge you a fee to complete the FAFSA. While paid preparers who disclose that there is free help available are operating within the law, those who charge you a fee simply to file should be scrutinized carefully as there are scams out there.

  1. Encourage work-study opportunities.

    On top of Pell grants, another way to fund college is through work-study, which will also be a result on your child’s FAFSA. The job they are offered will either be at the school or somewhere off campus, and they can request that their paychecks be applied directly to their tuition and fees.

    Studies show that working on-campus actually improves students’ grades. (The same is not true for off-campus positions.) That means that not only will your child be earning a portion of their keep while at school, but they’re also likely to perform better academically while they’re there.

  2. Apply for state grants.

    After you’ve filled out the FAFSA with Citizen, look to your state’s department of higher education. They typically award grants as well, and they can easily save you four figures per year.

  3. Apply for scholarships.

    Scholarships are another area where not enough people apply. This is money you will never have to pay back, yet many go unawarded each year for lack of applicants. To find scholarships appropriate for your child, you can check both obvious and bizarre places. Get started by encouraging them to write a scholarship resume.

  4. Apply for special allowances through DPW.

    If you come from a low-income household, check with your state’s Department of Public Welfare to see if they offer any special allowances (SPALs) for students. For example, in Pennsylvania eligible students can get assistance paying for their books through a DPW SPAL.

  5. Consider potential loan repayment options.

    If your student has applied for the FAFSA through Citizen, applied for scholarships and state grants, exhausted SPALs and still doesn’t have enough money for college, it may be time to look at student loans.

    Hopefully they’ve been offered options through the Federal government. I use the word hopefully because these loans tend to have a variety of options for repayment that can be advantageous—as long as you have the right kind of loan and payment plan.

    For example, if they want to enroll in Public Service Loan Forgiveness, where their loans will be forgiven after making minimum payments for ten years, they will have to have Direct subsidized or unsubsidized loans, or Direct consolidated loans. If you are the one applying for loans and you work in the public service sector, you may qualify for this program, too if you have Direct PLUS loans.

    The Revised Pay as You Earn program (REPAYE) requires students to have any of the Direct loan products, though parents will not qualify with PLUS loans. Students can also qualify with any of the following types of loans as long as they are consolidated:

    -Federal Perkins Loan
    -FFEL Consolidation Loan that wasn’t used to pay off a parent loan
    -FFEL Loans made to graduate/professional students
    -Subsidized or Unsubsidized Federal Stafford Loans

    There are several other programs, and each one requires you to not only have a specific type of loan, but to be on a specific type of payment plan, as well. You can learn more at the Federal Student Aid website.

Once They’re Accepted


National program to get student loans forgiven

  1. Carefully consider meal plan options.

    You don’t want to overspend on food, but you don’t want your child to go hungry while they’re away at college, either. Carefully consider meal plan options, which often include some combination of meal credits, “dollars” to be spent at school-sponsored restaurants and cafeterias, and specific days of the week allotted for dining. Often, credits cannot be carried over from one semester to the next.

    If you buy a big meal plan, encourage your student not to eat outside of the school’s dining halls very often—if at all.

    If you know they’re going to anyways, purchasing a smaller meal plan may be a smart idea as you let them manage the rest of their food budget on their own.

  1. Consider meal plans & on-campus housing vs cooking for themselves & off-campus housing.

    Housing and meal plans make up a surprising portion of college costs. Some schools will not allow freshmen to live off campus. However, if your child’s school does, look at nearby off-campus housing options that might allow them to cook at home. Even if this isn’t an option as a freshman, it may be an option a little later as they work their way into upper classmanship.

  2. Discourage buying from the bookstore directly.

    Unless it is absolutely unavoidable, discourage your student from purchasing through their campus bookstore. Prices are marked up beyond outrageous, and there are other options.

    We have found the best value to be purchasing physical, used textbooks outside of the bookstore and then reselling them at the end of the semester, but you can also rent physical or eTextbooks for a comparatively low price.

    If the book has been printed as a special edition just for your child’s campus or was written by their professor, have them check out Craigslist. It’s likely that students who took the class last semester are looking to unload their copies, and there’s no one who is going to buy them save other kids on campus—like your child.

  1. Encourage use of library reserve.

    One of the best-kept secrets at college libraries is the reserve section. In it, your child will be able to find a copy of every single required text the school currently has issued. The catch? There’s only one copy, and you can’t take it outside of the reserve area.

    If they only need the text to do some light homework, and there’s not a lot of competition for that single copy, they can go to the library and use it there without paying a cent.
    If they need easier access to it, they can take a photo of certain pages on their smartphones for free. Many libraries will allow you to copy pages from the text, but this will almost always cost money.

    Just don’t have them tell too many of their classmates about it, or they may have trouble getting their hands on that psych book the day before midterms.

  1. Research professor reviews to increase odds of passing.

    Just as we’ve all had that one favorite teacher who impacted our lives in momentously positive ways, we’ve all had that one professor who was an absolute nightmare. They didn’t grade things until the very end of the semester, so you never knew where you stood with course material. They rambled on about their cat for an hour instead of teaching any formulaic chemistry. Sometimes, they didn’t even have a firm enough grasp of the subject matter to be teaching it themselves.

    It can be difficult to pass a course in this type of environment, and the more often your kid has to retake a course, the more money their education is going to cost. Have them be smart about which section of a course they enroll in by having them research professors prior to registering.

 

Do you have any tips to save on your child’s education? We’d love to hear them in the comments below!

 

*This post is in collaboration with Citizen.*

Make Your Kid a Money Genius (Even If You’re Not)

Make Your Kid A Money Genius (Even If You're Not): A Parents' Guide for Kids 3 to 23I’ve been writing about personal finances for almost six years now. I like to think I’ve got a good grasp of it.

I’ve also performed in work positions where I needed at least a cursory understanding of developmental and educational psychology. I like to think I performed pretty well in those jobs, too.

But the intersection of finances and developmental psychology? While I think I’ve been doing some great things to teach my kids about money, I recently picked up a book that taught me there’s a lot that I didn’t know.

Make Your Kid a Money Genius (Even if You’re Not)

That book was Beth Kobliner’s most recent tome: Make Your Kid a Money Genius (Even if You’re Not). Kobliner is a leading authority on personal finance for young people with a laundry list of impressive work experience, including serving as a member of the President’s Advisory Council on Financial Capability under Barack Obama.

The basics that I had already been doing were within her text: teach your kids about opportunity costs, delayed gratification and savings. Teach them that mom and dad have to work to bring home money to pay for our home and food and toys.

But Kobliner opened up doors to me that I didn’t even know were there. Much of her work is based on scientific studies that I never knew had been performed, yet the engaging read went quickly and didn’t feel anything like a white paper.

The Book’s Construction

I read the book start to finish, but its construction allows you to pick and choose sections to read that are applicable to your current stage of parenting.

Each chapter is divided up into sections for “Preschool”, “Elementary School”, “Middle School”, “High School”, “College” and “Young Adulthood”. If your kid is 12, you don’t have to sift through what you should have been doing when they were three, or what you will have to do when they’re 20.

It covers a vast array of topics, many of which I had never thought about introducing to my preschoolers:

  • Savings
  • Hard Work
  • Debt
  • Smart Spending
  • Insurance
  • Investing
  • Giving Back
  • College

My kids came home from school with a fire safety packet the other day. We got to the crucial rule of not going back inside the house after you get out. Whatever toy or possession you want to retrieve is not worth risking your life.

I never would have thought of it before, but since I had read Kobliner’s book, I took the opportunity to explain to them, in the most basic of ways, renters’ insurance. It reassured them that their favorite toys and blankets would be replaced without mommy having to work fifty million hours to compensate for the costs.

There is also a section on financial advice for parents at the end. If you don’t have your money game together, it’s a quick primer to help you do the big important things easily so you don’t come off as a hypocrite to your kids. Also, having your stuff together will make your life better, period.

While there were some things I knew in the text, there was plenty that I didn’t. Here are some of the most interesting things that stuck out to me.

Our Daughters’ Money Gap

Culturally, we tend to talk to our sons more about money than our daughters. Our sons grow up feeling more confident about money because we have these conversations with them so often, and we therefore think they are inherently better with money. This holds particularly true on the topic of investing.

It might not be something that we are doing consciously; it may be a cultural subtext that is so deeply ingrained in us that we don’t realize we’re perpetuating it.

Kobliner points out that this is doubly detrimental because when our daughters enter the workforce, they are faced with the very real gender pay gap. They’re making less than their male peers and, because we didn’t address the topic properly in their youth, they feel less confident handling the money they do have.

My parents were by no means feminists, but I do consider myself very fortunate that this was not the case in my home when I was growing up. I plan to be intentionally aware of equity in financial education as I raise my own children after discovering this fact.

Teaching Kids to Wait and Save

I knew that distraction was a good way to avert tantrums in toddlers and, to a certain extent, preschoolers, but I had never thought to apply this tactic to financial lessons.

Kobliner encourages parents to, among other strategies, play fun games in checkout lines or even bust out videos on the phone. Then, once you’re out of the store, praise the child for not freaking out even though they really wanted that overpriced candy bar.

They may not be aware of what’s happening in the moment, but the positive reinforcement afterwards starts building neural pathways that encourage delayed gratification and can even stave off credit card abuse when they’re older.

College Jobs Can Be Beneficial

It turns out working up to 20 hours per week can boost a college student’s grades—but only if it’s on-campus. Off-campus jobs don’t show the same correlation. So don’t turn your nose up at those work-study opportunities offered on the FAFSA!

The Science of Happiness

I’ve written on the science of happiness before—and how money only contributes to about 10% of it. Kobliner cites a new(er) book, though, that asserts that we’re happier with many small purchases spread out throughout the year as opposed to one or two big ones annually.

So maybe skip that huge vacation and instead take a bunch of smaller weekend trips. I’m going to struggle with following this advice, but it makes logical sense.

The Engagement Ring Matters

Apparently there have been studies done about the correlation between engagement ring costs and divorce rates. Those that spent between $2,000 and $4,000 on the ring were 1.3 times more likely to get divorced than those that only spent between $500 and $2,000. You now have a non-financial reason to be stingy.

Saving for College Increases Attendance

So here’s some financially backwards psychology for you: children who know their parents are saving for their college as early as preschool are more likely to actually go to college. The crazy part? This is especially true when the household income level is less than $50,000.

Why do I think that’s crazy? If you’re from a household that makes less than $50,000 per year, you’re likely going to get full Pell and state grants, qualify for a ton of financial aid at the school level, and have a lot of scholarships open to you because of your economic status. These are the families who, in my educated opinion, are most likely to get full funding without their own savings.

Even though it doesn’t make the most financial sense, especially considering those with incomes under $50,000 likely aren’t fully funding retirement accounts, I can see how this is a situation where psychology may win out and play a massive role in that child’s future earning opportunities.

Ivy League Does Improve the Marginalizeds’ Earning Power

My biggest regret surrounding my college education is that I didn’t apply to the Ivy League school of my dreams. In retrospect, I probably would have gotten in, and I probably would have gotten enough financial aid to allow me to graduate traditionally.

However, I know that the name on your degree doesn’t affect your earning power. Unless, as I learned from Kobliner, you are Latino, black, from a low-income household or are a first-generation college grad. Kobliner says this may be because of the network you gain at these schools, and therefore the access to opportunity.

I agree with that, but will go a step further in my own, personal assumptions: that Ivy League name may help combat racism and classism, which both negatively impact wage gaps.

If you have a child who is in one of these marginalized groups, know that Ivy League schools typically have very large endowments that can often make their tuition free or at least far cheaper than some private, or even state, schools. If your child has the academic acumen to get in, it’s well worth applying. Don’t write them off as too expensive.

One last note on higher ed—Kobliner is a bit pessimistic about funding education through scholarships or graduating debt-free. I tend to be on the other end of that spectrum as there’s a lot of money left on the table every year because most students don’t aggressively pursue scholarships, and many don’t even apply for the FAFSA. This may be the only point of possible contention I had with the entire text.

Recommend?

Highly. I know I’ve told you a lot I learned from the book, but trust me when I say there is so much more. There are techniques I will be using today with my preschoolers, and techniques I’ll be coming back to the book to reference as my children grow older. If you want to learn a better way to teach your child to be a financially-capable adult, this is a must-read.

 

*I have been compensated for my time reading and reviewing this book. Regardless, all opinions are 100% my own and 100% honest.*

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