Financial Education

Most parents teach their kids about manners, good nutrition, how to drive, and hundreds of other tasks and skills that they need to learn on their way to becoming competent, independent adults. But how many families include educating their children about finances and money management in this list? Although more than half of families expect their children to be financially independent by age 21, at least 72 percent of parents express some reluctance to discuss financial matters with their children, according to a survey on Parents, Kids, and Money by the financial firm T. Rowe Price.

Clearly, parents need to incorporate money and finances in the skills and values they pass along to their children. And many of them do. But, according to the Council for Economic Education, a nonprofit whose mission is "to reach and teach every child in America about personal finance and economics"

• More than one in six students in the U.S. do not reach the baseline level of proficiency in financial literacy.

• Nearly one-quarter of millennials spend more than they earn.

• 67% of Gen Y have less than three months worth of emergency funds.

Earlier this year, we wrote about several apps and tools that could help young people manage their finances. And while these can be helpful, an even more powerful tool for enabling young people to  understand and manage their financial lives is a school course focused on personal finance. While a number of states require some coursework on this subject, it is usually only a part of a larger curriculum. Only five states require a separate, stand alone course in personal finance and only 20 states require an economics course for graduation.

The Council for Economic Education seeks to address the need for financial education by providing programs and tools to help families and educators give kids the tools they need to manage and improve their financial lives. These programs include "Never Too Young", designed teach personal finance to K-5 students in after-school/out-of-school settings.

The Council for Economic Education has numerous programs for students of all ages as well as educators and districts. If your child's school does not provide financial education, this might be a good place to begin to persuade them to do so.

Tips for National Scholarship Month

Happy National Scholarship Month! College costs are on the rise (a recent calculation from Bloomberg estimates tuition costs 1200% more than it did in 1978), but a college education is more important than ever. According to the National Center for Education Statistics, a young person with a bachelor’s degree can expect to earn about $20,000 more each year than a peer with only a high school diploma. Loans are one option, but we encourage young people to apply for as many scholarships as possible; it will cost only time, and students could end up earning substantial funds to put toward their school fees.

 courtesy pictures of money via flickr:cc

Here are some helpful tips for scholarship applications, culled from the National Scholarship Providers Association and our own research:

• Many scholarship providers send information to high school counselors. Students should visit their counselor’s office periodically to check for scholarship opportunities applicable to them.

• High school seniors should talk to representatives from the admissions or financial aid departments at their college (they may have to wait until they are accepted) to find out what kind of financial aid is available. Those who know what they’ll major In should communicate with that particular department as well; sometimes, departments will offer (or know of) scholarships available for students in certain fields of study. 

• Fill out the FAFSA as soon as it becomes available in early January (a very recent change permits using information from the prior year, allowing families to have the required information to submit earlier than in the past). Students should do this ASAP; there is evidence that those who complete the FAFSA early receive more scholarship money.

• Students should use resources like www.scholarships.com and www.fastweb.com. Local organizations like the Rotary Club, the Lions Club, community foundations, and private foundations are also good sources for scholarship information. Other websites that may be helpful are www.finaid.org and edvisors.com, for all things dealing with financial aid. 

• If a student knows what she will study or what line of work she will go into, she should look into organizations—both local and national—that may offer scholarship money to young people studying to enter particular fields. Insider tip: Local scholarships tend to award less money but a student’s odds of being awarded a local scholarship are much higher. Students should prioritize accordingly and be sure to apply for as many local or smaller scholarships as possible.

• Look into work-study opportunities, or consider a working part-time. Lots of time in college is unstructured and many students find they have time to take on a job. And studies show that students who work part-time tend to develop better time-management skills, often leading to better grades.

• Here’s another insider tip: After a student has been accepted, received his financial aid package, and been awarded any private scholarships, he should crunch some numbers to determine whether there is a large gap between amount of aid he has earned and the amount of tuition he and his family can afford to contribute. If he will not be able to afford college even with aid, he should ask his school about options for appeal. Many colleges have an appeal process that may yield more aid if a student’s campaign is successful. There is no guarantee, of course, and students should not take advantage of the system unless there is genuine need.

Finally, a cautionary note: DO NOT pay for scholarship or financial aid information. Frequently, these are scams, and even if some of these for-profit services are legitimate, there are too many free resources to make the cost worthwhile.

Learning Links: Recent News

Photo: monkeyatlarge

• Do Kids Really Have ‘Summer Learning Loss’? (Time Ideas)
• US Graduation Gain for Students with Learning Disabilities, but Challenges Remain (Southern California Public Radio)
• Fewer Minority Kids Diagnosed with ADHD (Reuters/Yahoo)
• Rate for Subsidized Stafford Loans Doubles (Alaska Public Media)

College Savings Day is May 29

Parenthood is full of uncertainties, but there’s one thing that parents can count on: college tuition is likely to keep rising. To spare themselves and their children from years of loan repayments, parents need to understand the many ways to save for college tuition and to reduce college costs.  There are plenty of options for saving beyond the coffee can hidden under the bed: Coverdell Education Savings Accounts (cover K-12 expenses in addition to college, and are limited to $2,000 annual contributions), standard personal savings and investment accounts (generally subject to state and federal income taxes), and 529 plans (college savings plans that are free from federal taxes) are all good options. In honor of College Savings Day on 5/29, we’ll focus this post on 529 plans. Future posts will look at other aspects of paying for college.

First, it’s important to know what costs your child will face. Take a deep breath and visit the College Cost Calculator for an estimation based on your child’s age, the type of school s/he will likely attend, and average tuition inflation.

Now that you know what you’re up against, the next step is to choose a 529 plan. All 529 plans have two things in common: they’re investment options, and they’re free from federal income tax. Most states offer several plan options, and some of them have further benefits that may make withdrawals free from state tax too, or qualify students for state grants and s
cholarships.

529 plans fall into two categories. The first, a prepaid tuition plan, is currently available in 11 states. It allows parents to buy tuition ahead of time, based on today’s costs. The money is then passed on to the college when the child enrolls down the road. This is a great option for students who know they’re going to stay in-state because it locks them into tuition rates that are almost certain to be lower. The second variety, the savings plan, is a bit more versatile. The 529 savings plan works a bit like a 401(k) retirement plan: money contributed into the account is invested, typically in mutual funds (either by a fund manager or by the account holder, depending on the plan), and can later be withdrawn for qualifying education expenses without being subject to federal taxes.

Here are some good things to know about 529s:

• While enrolling in your state’s plan may offer you particular benefits, you can enroll in any plan in any state, regardless of where you live or where your child ends up enrolling. Be sure to research all state plans to find the best one for your family. 

• Anyone can contribute to a 529, so spread the word to grandparents, aunts and uncles, etc.

• Almost all plans allow the account to be transferred to another beneficiary without penalty, so if your child is drafted to the NBA and no longer needs your help paying for college down the line, the account can become his younger sister’s college fund instead. 

• Most financial advisors recommend that parents who can afford only retirement savings or college savings choose the former. Your child can always borrow money for college, but you can’t borrow money for retirement. 

CollegeSavings.org allows visitors to research their plan options by state or by feature. Consider whether a prepaid tuition or savings plan is best for your family first, and be sure to consider other factors like the minimum initial contribution and maximum total contribution limits; state tax breaks and other state-specific benefits; and enrollment and other annual fees charged by the plan. 529 plans are considered to be assets of the parents, not the student, in calculating Expected Family Contribution for financial aid under the FAFSA form, the universally utilized calculator of college financial aid. This means that it has less of an impact when total family assets are considered.

A note about using a 401(k) or IRA retirement account as a college savings fund: Most financial advisors seem to steer people away from this option. Even though account holders can withdraw from these funds without penalties after the age of 59 1/2, the withdrawals still count as taxable income, unlike funds from a 529. Additionally, the amount withdrawn will be added to your annual income, meaning that you will fall into a higher income bracket and your child may not qualify for financial-based student aid next year.

Important Note: The information above is intended to get you started thinking about these issues -- not to be financial, investment, or accounting advice. Please see an appropriate professional for specific guidance, tailored to your family's needs.

Important Lessons In Financial Literacy

Wisconsin, as we all know, is the home of delicious cheese, Bucky the Badger, and…great tools for teaching financial literacy? Educators in Wisconsin have made a commitment to teaching students the money management skills they’ll need someday to achieve their financial goals, whether they’re facing college tuition, career decisions, debt, or long-term planning.

These important lessons seem hard to teach. Happily you don’t have to be a resident of Wisconsin to benefit; a great deal of information is available to everyone through Wisconsin’s Educational Communications Board.

The Financial Literacy: TEACH IT! site features a series of videos to help educators introduce topics like saving and investing, risk management, and being a critical consumer. Sound dry? Watch the video in which a teacher helps her children understand the relationship between risk assessment and insurance and you may change your mind.

(Click through the image above to access the video.)

In it, Ms. Pingel directs her second and third graders to place houses they've constructed into a tub filled with dirt and trees to resemble a landscape. After talking about their rationale for locating homes in different areas, she passes out a sheet of insurance options and the kids pick the ones they think they’ll need—accident, chimney, earthquake, etc.—based on the location of their house. (Prices are measured in recesses to help kids get the idea of value – personal liability insurance will set a child back five recesses!). Then disaster strikes: Ms. Pingle dumps a pitcher of water into the tub! Some houses are washed away, but the ones on high ground are untouched. Then Ms. Pingle leads a discussion about the kids’ insurance choices now that they face hard times. The TEACH IT! page has links to the handouts used in nearly all lessons, and educators can view excerpts from a Q and A session with the teacher after the lesson for further information.

The financial literacy lessons are divided by age: pre-kindergarten to grade four, grades five through eight, and grades nine through twelve. This website is an outstanding resource for teachers, but also for parents who want to teach their kids about money management but are not sure where or how to start. The ideas and videos are great starting points for important conversations that will help kids make smart decisions for years to come.

Scholarships for Students with ADHD

We are often asked about college scholarships for students with learning or attention issues, and find it frustrating when we have to answer that such scholarships are rare indeed. So, with the deadline approaching for one such program, and several others coming up, we thought it would be a good time to take a look at this topic.

The Anne Ford Scholarship and Allegra Ford Thomas Scholarship both have an application deadline of December 31, 2012. These scholarships were established by Anne Ford, former Chairman of the Board of the National Center for Learning Disabilities and her daughter, Allegra, whose challenges with learning and related issues were chronicled in the book Laughing Allegra. The Anne Ford scholarship is an annual $2,500 award for each of  four years for a student with a documented learning disability who will be pursuing a full-time bachelor's degree. The Allegra Ford Thomas scholarship provides a one-time $2,500 award for a student who will be enrolled in a two-year community college, a vocational or technical training program, or a specialized program for students with learning disabilities.

Shire, a pharmaceutical company that manufactures medications for ADHD, will offer a $2,000 scholarship and a year of coaching to fifty students who will be attending a college, university, technical school, or vocational school. Applications are due by March 27, 2013.

Learning Ally (formerly Recording for the Blind and Dyslexic) offers the Marion Huber Learning Through Listening (LTL) awards, which provide six scholarships for students with specific learning disabilities. Applicants must be a member of Learning Ally. The awards for the three top winners are $6,000 each and three special honors winners receive $2,000 each. The deadline for the next awards is March 15, 2013.

A helpful resource for scholarships and other financial aspects of college is available on the website of the College Board. Students and parents should also become familiar with FAFSA, the Free Application for Federal Student Aid.

Photo: CC by Tax Credits

Preparing to Face College Tuition: The Net Price Calculator

Everyone knows college is getting more and more expensive. Each year, it seems, institutions across the country hike up tuition a little more. However, are rate hikes as steep a they seem? A recent analysis by NPR's financial blog Planet Money found that just as college sticker prices have risen, available scholarship and grant money is on the rise too. The upswing in tuition and grants almost matches, meaning that the net cost of attending college may actually not have risen as much as is popularly believed.

This sounds like great news, but what can students realistically expect to pay? To help families grapple with this question as they prepare to confront the cost of sending their children to universities, colleges are now required to post a very useful net price calculator on their websites. Planet Money explains that the calculator poses questions about the student's performance and his/her family's financial situation, then calculates what the likely tuition will be. For many students, the cost is considerably lower than the advertised sticker price once applicable scholarships and grants are figured in. The National Center for Education Statistics has a  useful page containing more information about the calculator; it's worth a visit for anyone who plans to pay for higher education in the near future.

Photo: ImagesofMoney/Flickr Creative Commons