Basking Ridge Financial Advisers Offer College Savings Consultation

One of the most important lessons my parents taught me is the beauty of compound interest. By saving even just a little money in decent investments at regular intervals, your money will regularly grow over time.

Thanks to my parents’ good planning, I feel blessed to have escaped college loans entirely. My mom always said that every generation should “do a little better than the one before,” and I really want to provide at least the same for my kids. My husband (who worked his...um hindquarters off paying for college independently) agrees.

I personally think that when you set a goal, you need to have a distinct goal. Ours is to save enough so that both our daughters can attend Rutgers for four years and obtain bachelor's degrees. Whether they go to Rutgers or not is their choice — but that amount should give them some viable options and it’s an achievable, but still aggressive goal for us (especially since we decided I would work part-time, until after the kids are school aged).

We met with a financial planner, who recommended a specific 529 college savings plan and outlined a path for meeting our goals.

In that vein, I interviewed several financial advisors in Basking Ridge, who had some great advice for parents wanting to save for their kids’ college educations.

Gwen Gepfert, Principal, of Oaktree Financial Planning and Consulting. 74 Crest Dr. (908-580-0255) agrees with the idea of setting boundaries on how much you intend to offer your child for college, stating, “Just as important as helping your child invest their college funds is sitting down and explaining how much you are able and willing to pay for their college costs.”

Her recommendations:

• If college is only a few years away try FDIC-insured Certificates of Deposit (CDs). To compare rates, she suggests looking online at www.bankrate.com or www.depositaccounts.com.
• If college is more than five years away: “A no-load, low cost diversified balanced mutual fund could be a good option.” An example is Vanguard’s LifeStrategy Funds, which have a minimum investment of $3,000.
• Longer-term college savings vehicle: Consider a custodial 529 plans, like Utah Educational Savings or College Savings Iowa Plan. Both are low cost and offer Vanguard funds.

Gepfert advises parents that, “For financial aid purposes, custodial accounts have a higher impact on financial aid eligibility than if the assets were held in a parent's name. Also, a capital loss from selling assets in a custodial account cannot be reported on the parent's tax return, but can be carried over if not used on the child's tax return.”

Michael Gouldin, CEO and President of Gouldin & McCarthy, 180 Mt. Airy Rd, Suite 203, (908-630-0200) suggests you select a college or university as a goal and then plan accordingly. “We use the assumption that your investments (with a 5+ year time horizon) should grow by about 7% per year in a balanced account and the rate of inflation on college expenses should be about 5% per year (based on historical averages).  Once you know the amount you need, establish a savings plan on a regular basis (monthly is best) and begin dollar cost averaging into your favorite 529 account."

He states that once you have the right amount of money directed into investments that will offer returns to get you where you need to be, the real key is to stick to your plan and keep on saving. Gould recommends the website www.savingforcollege.com for those interested in further general information.

Setting a goal and following a plan were the key themes from both financial planners. Since finances are unique to each family, it’s a great idea to meet with a financial planner — for my family, it was the catalyst that drove us to open 529 plans for both our kids, which are performing really well.