Planning for College | Redstone Federal Credit Union

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Saving Strategies for Every Step

Newborn to Age 10

Your goal should be to put away as much as you can each month as soon as your child is born. If you didn't start right away, it is still early enough to start saving for college with a long-term investment perspective. However, make sure you are funding your tax-advantaged retirement plans first.

  • This is a great time to start a monthly college investment program. See the section on Getting Started to get an idea of how much college will cost.
  • If you have already been investing, make sure that the amount you are investing will help you reach your goal. Consider increasing the amount you are investing each month, and consider diversifying your college investments. See Your College Saving Strategy.
  • Select the appropriate investment vehicle. Consider investing in growth oriented investments. See Your College Saving Strategy and Investment Vehicles for more information.
  • Decide who the owner of the account should be. If you want to maintain control over the funds, do not open the account in your child's name. If your objective is to save taxes and you are comfortable giving up control of the funds when your child is no longer a minor, then consider opening an UGMA account or an UTMA account. See Tax-Saving Investment Vehicles for more details.

IMPORTANT NOTE: If you think that ultimately you will be applying for financial aid, it is best to invest the money in an account in your name. See the section Landing Financial Aid to help you decide how much you should invest.

  • There are several tax-advantaged ways to save for college. See Tax-Saving Investment Vehicles to determine which investment may be right for you.
  • Open a college investment account and begin investing on a monthly basis. See your bank or credit union's investment representative, who can help set up the right type of account.
  • See the Putting It All Together worksheet to help you determine where the money is going to come from to pay for each year of school. The most important issue at this stage is to get started on a monthly investment program that takes advantage of the long-term time horizon you have to benefit from a growth-oriented investment program.

Age 11 to 16

Now is the time to assess how your whole college-funding program will come together. Get as specific as you can in terms of what kind of school your child will be going to (two-year or four-year school, in-state or out-of-state, public or private), and what portion of college costs will be paid for by investments, financial aid, loans, scholarships and other sources. Start doing research in all these key areas.

  • Before you start a college investment program, make sure you are funding your tax-advantaged retirement plans first.
  • It is still not too late to begin a monthly college investment program. You can still benefit from some long-term growth. See Getting Started to get an idea of how much college will cost.
  • If you have already been investing, make sure that the amount you are investing will help you reach your goal. Consider increasing the amount you are investing each month and consider diversification of your college investments. See Your College Saving Strategy.
  • Select the appropriate investment vehicles. Consider investing in growth-oriented investments up to age 11. As the child approaches age 13, start diversifying. Look at growth-and-income investments or fixed-income (bonds). As your child reaches his or her mid-teens, consider adopting a more conservative investment strategy, because your time frame is getting shorter. See Your College Saving Strategy and Investment Vehicles for more information.
  • Decide who the owner of the account should be. If you want to maintain control over the funds, do not open the account in your child's name. If your objective is to save taxes and you are comfortable giving up control of the funds when your child is no longer a minor, then consider opening an UGMA account or an UTMA account. See Tax-Saving Investment Vehicles for more details.

IMPORTANT NOTE: If you think that ultimately you will be applying for financial aid, it is best to invest in an account in your own name.

There are several tax-advantaged ways to save for college. See Tax-Saving Investment Vehicles to determine which investment may be right for you.

  • Open a college investment account and begin investing on a monthly basis. See your bank or credit union's investment representative, who can help set up the right type of account.
  • Where will you be able to borrow money if you need to? What is the best way to borrow? Many people borrow to fund college costs, the trick is to get the best deal and tax deductions (if you are eligible). See Other Ways to Meet College Costs and Loans for Learning to find out about other resources that may be available.
  • Start looking into financial aid. It may seem too early to be thinking about financial aid, but getting a handle on this now will help you in your overall college-funding strategy. It is good to know now whether or not you qualify for financial aid, because some schools have early filing deadlines. See Landing Financial Aid for information on this process. Also see Federal Loans and Grants and Private Loans for College for grant and loan comparison charts.
  • Start thinking about other resources that would be available to pay for college.
  • See the Putting It All Together worksheet to help you determine where the money is going to come from to pay for each year of school.

Age 17 to 18

It is time to develop a specific plan on how your whole college-funding program will come together. Work with the high school guidance counselor to take advantage of their services. Consider using a service that matches up your child and his or her background with a college that meets his or her needs. Accompany your child on site visits to schools. Be specific as to what portion of college costs will be paid for by investments, financial aid, loans, scholarships and other sources. Identify any funding shortfall now so you can plan for it. If you haven't finished researching these key areas, get started on them now.

  • Work with your child to decide on the type of school he or she will attend (two-year, four-year, public, private, etc.)
  • It is too late to get any significant investment benefit out of a college investment program; however, it still makes sense for you to invest money monthly as part of your overall college investment strategy. If you are going to start a monthly investment program, open a bank account. Short-term or intermediate-term bonds also may make sense. You may want to avoid growth or stock investments due to the volatility of such investments.
  • If you have already been investing, it may be time to start selling long-term growth investments and putting that money in lower-risk, short-term investments such as bank accounts. The focus now is to make sure the money is there when you need to pay the college bill. You should consider no longer taking the risk associated with long-term investments. Selling investments will change your taxable income and may cause you to pay more taxes; but the overriding issue is to make sure your money is more liquid. See Your College Saving Strategy and Investment Vehicles for more information.
  • If you are investing monthly, you still need to decide who the owner of the investment account should be. See Who Should Own the Investments? For more information.
  • IMPORTANT NOTE: If you think that you will be applying for financial aid, it is best to invest the money in an account in your name.
  • There are several tax-advantaged ways to save for college. See Tax-Saving Investment Vehicles to determine which investment may be right for you.
  • Open a college investment account and begin investing on a monthly basis. See your bank or credit union's investment representative, who can help set up the right type of account.
  • Consider making a gift of appreciated stock or other investments to your child. When your child sells the asset, depending on the "kiddie tax" rules that apply, they may pay tax at their tax rate (assuming the child is at least 18), which could be lower than yours. However, this may impact the probability of receiving financial aid.
  • Where will you be able to borrow money if you need to? What is the best way to borrow? Get the loan applications and find out, from your lending sources, exactly how much they will lend to you. Many people borrow to fund college costs, the trick is to get the best deal and tax deductions (if you are eligible). See Loans for Learning.
  • Apply for financial aid, if that's appropriate. Have children apply for scholarships. Make sure you meet all the deadlines. See Landing Financial Aid for information on the financial aid process. Also see Federal Loans and Grants for grant and loan comparison charts.
  • Develop a plan to use other resources that would be available to pay for college. See Other Ways to Meet College Costs.
  • Have your child start the college application process. If he or she has one favorite school, discuss the pros and cons of applying for early admission at that school alone. Your child will take college entrance exams, narrow down his or her list of schools, prepare school applications, complete essays, ask for letters of recommendation, etc. Work closely with the high school guidance counselor to make sure you're not forgetting anything. If you're applying for student aid, you'll need to fill out the FAFSA (Free Application for Federal Student Aid). Most schools will also use this form to determine which students they will be offering scholarships to.
  • Start talking to your child about budgeting and managing money.
  • See the Putting It All Together worksheet to help you determine where the money is going to come from to pay for each year of school.

Age 19 to 22

You're in the bill-paying stage now, so all your college investments should be in conservative, short-term vehicles. Monitor your plan each year and try to anticipate needs over the funding period. Try to avoid last-minute panic actions.

  • Make sure all your investments are in short-term, conservative vehicles like bank accounts. See Your College Saving Strategy and Investment Vehicles for more information.
  • Consider making a gift of appreciated stock or other investments to your child. When your child sells the asset, depending on the "kiddie tax" rules that apply, he or she will pay tax at their tax rate, which could be lower than yours.
  • If you are borrowing money, make sure you are also thinking about a plan for paying off the loan. Be clear with your child about his or her responsibility when it is time to pay off any student loans.
  • Apply each year for financial aid, if it is appropriate, using the FAFSA (Free Application for Federal Student Aid). Circumstances change and your needs will change. Stay organized. Stay in touch with the financial aid office at your school. See Landing Financial Aid for information on this process. Also review Federal Loans and Grants for grant and loan comparison charts.
  • Decide if there are other financial resources to help you pay college bills. See Other Ways to Meet College Costs and Loans for Learning to learn about other resources that may be available.
  • Talk to your child about earning money and keeping expenses under control. Discuss working part-time, working during the summer, buying used books, selling books after the semester is over and budgeting his or her own money. You're going to need your child to understand and help to stay within your budget.
  • Monitor tuition increases and other expenses.
  • There are several tax provisions designed to help students and their families who are in the tuition bill-paying stage. See Education Tax Incentives to determine if you qualify.
  • See the Putting It All Together worksheet to help you determine where the money is going to come from to pay for each year of school.

Two-Year or Four-Year School?

First, determine the cost of college so you know what you need to save. The total cost of college includes tuition, room and board, books, and other living expenses. If you choose a public school, you may be able to pay for college by using your cash-flow resources and developing a monthly investment program. If you choose a private college, you may have to develop a monthly investment program plus take out loans, apply for financial aid, and use other resources.

One choice for you and your child to make is whether he or she will go to a two-year or four-year school; two-year schools have certain advantages in terms of cost and entrance requirements. There are several college planning services that you and your child may want to consult. In addition, don't forget to factor in inflation in your financial planning: the cost of college goes up, just like the cost of everything else.

Cost isn't your only consideration. Choosing a school that makes sense for your child is very important.
Two-year schools, or community colleges, may be a good place to start. Typically, the entrance requirements are not as strict as four-year schools, so if your child's academic record is not the greatest, this is his or her chance to start in a college. If your child goes to a two-year school and develops a good academic track record, there may be a higher probability of transferring to the school of first choice at the end of the two years. Typically, two-year schools are also less expensive.

As you can see from the following chart, the average cost at public colleges is approximately $24,000 and at private college, $48,000. Private schools can be two to three times as expensive as public schools.

Average Estimated Undergraduate Budgets, 2016-2015
(Enrollment Weighted) *
Four-Year SchoolTwo-Year School
PrivatePublic (out-of-state)Public (in-state)Public
Tuition & Fees$32,405$23,893$9,410$3,435
Books & Supplies$1,249$1,298$1,298$1,364
Room & Board$11,516$10,138$10,138$8,003
Transportation$1,003$1,109$1,109$1,774
Other Costs$1,628$1,106$1,106$2,257
Total$46,831$38,544$24,061$16,833

* These are enrollment-weighted averages, intended to reflect the average costs that students face in various types of institutions.

Source: The College Board, Annual Survey of Colleges

Transferring schools to save funds

If funds are low, consider starting out at a two-year school and then transferring to a four-year school. This strategy is appropriate if you cannot afford the cost of a four-year school. You can minimize college costs if your child attends a two-year school in the freshman and sophomore years. This could give you more time to save for the higher-cost, four-year school.

SUGGESTION: Working with the high school guidance office, your child should develop a list of schools in which he or she is interested, and do your research on each of them. You and your child should rank the schools without regard to cost. Then rank them according to what you think you can afford. This process will help you hone in on a school that your child likes and that you can afford.

Securities offered through LPL Financial, member FINRA/SIPC. Insurance products offered through LPL Financial or its licensed affiliates. The investment products sold through LPL Financial are not insured Redstone Federal Credit Union® deposits and are not NCUA insured. These products are not obligations of the Redstone Federal Credit Union and are not endorsed, recommended, or guaranteed by Redstone Federal Credit Union or any government agency. The value of the investment may fluctuate, the return on the investment is not guaranteed, and loss of principal is possible. The investment products are being offered by an employee of Redstone Federal Credit Union who is also a registered representative of and sells products on behalf of LPL Financial.

The services offered within this investment site are available exclusively through our U.S. registered representatives and are available for U.S. residents only. LPL Financial U.S. registered representatives may only conduct business with residents of the states for which they are properly registered. Please note that not all of the investments and services mentioned are available in every state.

RFCU and Redstone Brokerage Services are not registered broker/dealers. LPL Financial is a separate entity from and not affiliated with RFCU or Redstone Brokerage Services. RFCU does not warrant, guarantee, or insure any product or service offered by LPL or Redstone Brokerage Services. Redstone Brokerage Services and RFCU do not provide tax advice. Please consult your tax advisor for your specific questions.

Must be RFCU member to obtain investment products. Must be eligible for membership and open a share savings account in order to join. A $5.00 minimum balance is required to open and mus be maintained in share savings account at all times. Fees and other restrictions may apply. RFCU and Redstone Brokerage Services are affiliated but separate entities.

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