Preparing Your Child for College: Financial Tips for Parents
Megan Williams • August 14, 2024
As we approach the fall, many parents, including Frank, are preparing to send their children off to college. Frank is navigating the unique challenge of having twin daughters attending different universities this year. This transition brings to light the critical financial considerations that come with sending kids to college. At Meritrust Wealth Management, we understand that preparing your children with a solid financial foundation is crucial, and it's never too early to start these important conversations. Here are some practical tips to help you and your student manage finances effectively.
1. Budgeting Basics
Encourage your student to create a budget outlining their expenses, including tuition, books, housing, food, and miscellaneous costs. This budget should be adjusted annually to reflect changes in costs and spending habits. Teaching your child to manage their budget early on sets them up for financial responsibility and independence.
2. Educate About Responsible Borrowing
Understanding the implications of student loans and borrowing responsibly is essential. Regular, honest conversations about the long-term impact of student loan debt on financial goals post-graduation can help your child make informed decisions. Encourage them to borrow only what is necessary and explore other funding options whenever possible.
3. Explore or Revisit Financial Aid
Financial aid is not a one-time effort. Every fall, review your student's financial assistance package, including scholarships, grants, and loans. Ensure the Free Application for Federal Student Aid (FAFSA) is completed annually to secure continued support throughout college. Staying proactive with financial aid can significantly alleviate the financial burden.
4. Understand Your Tax-Advantaged Savings Plans
If you have a 529 plan or Coverdell Education Savings Account (ESA), ensure you and your student know how to utilize these funds. These accounts offer tax benefits and can help offset tuition and related costs, but remember, distributions must be used for qualifying expenses to avoid penalties.
5. Encourage Part-Time Work
While academics are the priority, consider part-time work or internships to supplement your student's income and gain valuable work experience. Balancing work and study can teach time management and provide financial relief.
6. Take Advantage of Student Discounts and Resources
Many companies offer education discounts that can help reduce expenses. Encourage your student to look for discounts on essentials like technology, groceries, and services. Additionally, utilize campus resources such as career services and financial literacy programs to further support their financial education.
7. Plan for Post-Graduation Repayment
Help your student develop a plan for loan repayment after graduation. Consider factors such as income-driven repayment plans, loan consolidation, and strategies for accelerating debt repayment. A well-thought-out repayment plan can ease the transition from college to the workforce.
8. Prepare for Emergencies
Establishing an emergency fund is crucial for unexpected expenses during college. Additionally, consider creating essential legal documents such as a power of attorney, a living will, and a HIPAA authorization for your young adult.
These tips can provide a solid financial foundation for your college-bound student. Preparing them now can lead to a more secure and successful future. If you have any questions or need personalized guidance, we're here to help.
Schedule a consultation
with Meritrust Wealth Management to discuss how we can support you and your family through this exciting and challenging time.
Watch as your Meritrust Team discusses the basics of Social Security and Medicare while covering some of the ways in which financial planning can help you make the right choice for you and your goals.
Key Points: Impact on Business Valuation: Life insurance proceeds must be included in the business valuation for estate taxes. Potential for Higher Estate Taxes: This could push estates over the exemption limit, increasing tax liabilities. Liquidity Concerns: Without proper planning, businesses may face liquidity challenges when covering estate taxes. Alternatives Available: Different buy-sell structures can help avoid these issues. As a business owner, planning for the future involves many complex decisions, especially when it comes to protecting the value of your business and ensuring a smooth transition in the event of an owner’s death. The recent Supreme Court decision in Connelly v. United States has introduced significant changes that could affect your estate planning, particularly if your business relies on an entity-purchased buy-sell agreement. Understanding the Supreme Court's Decision The ruling centers on how life insurance proceeds are treated within entity-purchased buy-sell agreements for estate tax purposes. The Supreme Court has ruled that these proceeds must be included in the business’s valuation within the deceased owner’s estate. However, the repurchase obligation—essentially the cost the business incurs to buy back the shares—cannot be used as an offset against the fair market value (FMV) of the business. This change could result in a higher valuation of your business, potentially increasing the estate's value and leading to larger estate tax liabilities. What Does This Mean for You? As a business owner, you might now face a situation where your estate's value is inflated due to the inclusion of life insurance proceeds, pushing you over the current estate tax exemption limit. This could result in a significant increase in the taxes owed upon your passing, creating challenges for your heirs and possibly requiring them to sell business assets to cover these taxes. Liquidity Issues: This ruling could also introduce liquidity challenges. Without additional life insurance or proper planning, your estate might struggle to cover the increased tax liability, putting the future of your business at risk. How to Protect Your Business Thankfully, there are strategies available to mitigate these potential issues: Cross-Purchase Buy-Sell Agreements: In this structure, each business owner holds a life insurance policy on the other owners, allowing the proceeds to bypass the business entirely. This structure can help avoid inflating the business’s valuation. Cross-Endorsement Structures: This approach reduces complexity by allowing each business owner to endorse their life insurance policy’s death benefit to the other owners, simplifying administration while avoiding the estate tax impact. Insurance LLC: Forming an LLC to own the life insurance policies can centralize and streamline policy management, although this requires careful structuring to ensure it avoids the same tax implications as entity-purchase agreements. Trusteed Buy-Sell Agreements: By placing the life insurance policies under the control of a trustee, the proceeds can be used to facilitate the buyout without increasing the business's estate valuation. Next Steps If your business has a buy-sell agreement in place, now is the time to review it with your financial advisor and legal counsel. Ensuring that your planning is up-to-date and compliant with the latest legal developments is crucial to protecting your business’s future. We’re here to help you navigate these changes and find the best solutions for your unique situation.
As we enter an unprecedented era of wealth transfer, women are set to control more money than ever before. This shift presents a unique opportunity for female investors, but it also comes with distinct challenges. Understanding these challenges and finding the right financial advisor can make all the difference. Here’s an explainer on why investing is different for women and how they can navigate these changes effectively. The Great Transfer of Wealth Women are at the forefront of a massive shift in wealth distribution. Over the next few decades, it's estimated that women will inherit and control an increasing share of wealth. This "great transfer of wealth" means more women will have the financial power to shape their futures and those of their families. However, with this newfound control comes the need for informed investment strategies tailored to women's unique financial situations. Unique Challenges for Women Investors Longevity Concerns: Women tend to live longer than men, which means their retirement savings need to last longer. This requires careful planning to ensure that their savings can support them throughout their extended retirement years. Caretaking Responsibilities: Many women find themselves in the "sandwich generation," caring for both their children and aging parents. This dual role can impact their ability to save for retirement and necessitates a flexible and resilient financial plan. Underrepresentation in the Financial Industry: Women are significantly underrepresented in the financial services industry, leading to a lack of advisors who understand the specific needs of female investors. This makes finding a financial advisor who appreciates these unique challenges crucial. Effective Strategies for Women Set Clear Financial Goals: Start by identifying your short-term and long-term financial objectives. Whether it's saving for retirement, your child's education, or a dream vacation, having clear goals will help guide your investment strategy. Assess Financial Health: Take a thorough look at your current financial situation. Evaluate your income, expenses, savings, and any debt. This assessment is the foundation for any effective financial plan. Leverage Retirement Tools: Make the most of employer-sponsored retirement plans and Individual Retirement Accounts (IRAs). These tools offer tax advantages and can significantly boost your retirement savings. Enhance Financial Literacy: Educate yourself on investment basics and financial planning. Understanding the fundamentals of investing will empower you to make informed decisions and avoid common pitfalls. Partner with a Certified Financial Planner (CFP): A CFP can provide tailored advice and strategies that address the unique financial milestones women face. They can help you navigate life's financial challenges and prepare for unexpected events, ensuring a secure retirement. The Importance of a Knowledgeable Financial Advisor Given the unique challenges women face in financial planning, working with a financial advisor who understands these issues is essential. An advisor who is attuned to the specific needs of female investors can provide invaluable support and guidance. They can help you create a comprehensive financial plan that accommodates your longevity, caregiving responsibilities, and other unique considerations. At Meritrust Wealth Management, we specialize in helping women take control of their financial futures. Our team is dedicated to providing personalized advice that aligns with your life goals and financial situation. Schedule a Consultation Ready to take the next step in securing your financial future? Schedule a consultation with Meritrust Wealth Management today. Our experienced advisors are here to help you navigate the complexities of investing and create a strategy that ensures long-term security and peace of mind.
