Finding money to pay college bills out of pocket

Information about Finding money to pay college bills out of pocket

Published on July 29, 2014

Author: scarlerburn



An Abney Associates Ameriprise Financial Advisor: An Abney Associates Ameriprise Financial Advisor “Finding money to pay college bills out of pocket” PowerPoint Presentation: You've saved for your child's college education through the years, helped your child research schools, and supervised the application process. Now, thankfully, your child is in college. But you probably can't disappear just yet--there are still bills to pay . Maybe you underestimated exactly how much financial aid would cover. Or perhaps you knew all along that you'd have to use some of your own resources or take out more loans. In any case, you'll need to come up with some money soon. So where should you look? PowerPoint Presentation: YOUR PAYCHECK If you can afford it, applying part of your paycheck to your child's college bills is probably the easiest route. You won't have any paperwork to fill out or messy calculations at tax time, and you can leave your retirement accounts and life insurance intact. Most colleges bill once each semester. To have enough money saved to meet each semester's bill, consider setting aside an amount from each paycheck as soon as you get it, rather than saving whatever is left at the end of the month. PowerPoint Presentation: As you accumulate money, you should put it somewhere safe (e.g., a savings account, money market account, or certificate of deposit) because of your short time frame. Some colleges, however, offer quarterly or monthly bills in an effort to make payment easier for you. Colleges may even offer you a tuition discount if you allow them to debit your account directly. In addition, some private companies now offer a 10-month payment plan coordinated with individual colleges. PowerPoint Presentation: The main drawback to using your paycheck as a source of cash for college bills is that this consistent outflow of cash over a period of months or years may leave you financially strapped to invest for other goals. To determine how much of a contribution you can manage (if any), you'll need to prepare a detailed budget of your household income and expenses. PowerPoint Presentation: YOUR SAVINGS AND INVESTMENTS The next logical place to look for spare funds is your savings and investments. This category encompasses everything from savings accounts and money market accounts to stocks, mutual funds, and real estate holdings. Not surprisingly, it can be difficult to figure out which source to use. Generally speaking, withdrawing from your savings accounts is the easier route. Again, no applications or independent approvals are necessary (except perhaps from your spouse!). Also, no tax penalties are associated with such withdrawals. And the fact that savings accounts generally earn the lowest rates of return means that you don't have to worry about missing out on high returns. However, try to keep at least three to six months' worth of savings on hand for emergencies . PowerPoint Presentation: The process is a bit more complicated with investments. Though most investments are easily liquidated (i.e., converted to cash), it's not always easy to know which ones to liquidate. The answer depends in part on each investment's rate of return, future prospects, and potential capital gain (or loss) if sold and the tax consequences. If you're unsure which investments to liquidate, a professional financial planner can help you sort through the possibilities. If you have a 529 college savings plan or a 529 prepaid tuition plan, you'll need to notify the plan administrator before you make a withdrawal. Check the specific rules of your plan for more information. If you have a Coverdell education savings account, keep in mind that all withdrawals must be made before the beneficiary reaches age 30 (unless the beneficiary has special needs). PowerPoint Presentation: YOUR HOME If you're one of the lucky ones whose home has increased in value over the years, you can usually tap this equity for college bills by taking out a home equity loan. The loan can be structured as either a revolving line of credit (you're approved for a certain amount and you tap the funds periodically as you need them) or a second mortgage (you receive one lump sum). The main advantage of a home equity loan is that interest payments are usually tax deductible. And because your home serves as collateral for the loan, the interest rate is likely to be lower than on an unsecured loan. However, because the loan is now tied to your house, your lender can foreclose on your home if you default. Article Source: /

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