College Planning

Cash Flow Analysis

Establishing a Trust

Insurance
 

College Planning

There are now many investment opportunities open to parents, grandparents and children to prepare for the expense of college. These include state pre-paid tuition plans, custodial accounts, Roth IRAs, and others. However, because each option has distinct advantages and disadvantages, it must be chosen with care.

Does the child have assets of his or her own? Will he or she be eligible for financial aid, grants or scholarships? Which schools does the child favor? Are the parents in a high income tax bracket? These are just a few of the considerations that help with the decision about appropriate investing.

As parents or grandparents, your first task will be to narrow down the type of college or university the child will be attending. You probably will not know exactly, but will likely have an idea whether it is going to be a state school or an expensive private college. This helps pinpoint the costs involved, since there are significant differences among schools. Next, knowing the family's income, you should determine whether the child will be eligible for aid, grants or scholarships. The schools can help with these calculations. Software, plus on-line worksheets are also available. A financial planner can, of course, assist with this step.

Knowing those two things, the type of school and family income, it is easier to resolve which investment option is appropriate. For instance, if the child has excellent grades, the parents are not in the higher income brackets, aid, grants and scholarships are all viable options. However, setting up a custodial account such as an UGMA account with a mutual fund will shift assets to the child, which make him less eligible for aid. This is an area where a financial planner can bring savings to a family and help as a guide through this expensive endeavor.

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Cash Flow Analysis

It is too easy, especially with the availability of credit cards, to let money slip through our fingers. A common complaint is, "where did it go?" Needless to say, a client who cannot save and invest never gets ahead, and is very unlikely to become financially secure.

It takes some work and a change of focus, but obtaining financial control is well worth the effort. First, debts have to paid off so they no longer drain resources. Often this has to be done slowly, over several years' time. And of course the client must stop using credit cards unless the balance is paid in full each month.

The next step is to detail annual spending, divided into two main groups, essential and discretionary. A planner can provide a list for this purpose. Worksheets are also available on several web sites. When spending is under control, the next step is to begin to accumulate wealth and establish a secure future.

A planner cannot do the first two steps for client, but can only provide guidelines and worksheets. This is a part of financial planning chiefly performed by the client.

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Establishing a Trust

A planner can determine whether it is feasible to set up a trust after an analysis of the client's assets. However only an attorney can draw up a trust.

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Insurance

Are your life insurance, disability, and other insurance adequate? A financial analysis of income and assets, together with considerations about the client's age, goals and risk tolerance will lead to this determination.