The Kids and Your Money, Revisited

Written by John Osbon on September 7, 2016

We first wrote about kids and money in May 2014. Here’s an updated version, circa 2016, sparked by real client conversations. What are parents talking about now? Education – price and value – seem to be top of mind, along with some other topics that may be just what you are thinking about.

It costs what?

Sticker shock no longer seems like an adequate term to describe the cost of college. Maybe sticker stroke? The average college education now costs $32k per year, with top colleges getting $65k per year, room and board included. And who wouldn’t want the best education for their child? But remember, “most expensive” and “best” are far from the same thing.  Think about best education in terms of best for my kid.

As for the cost, don’t despair, even if you are like one client who said “I’m a little late on funding the 529s,”  Start researching instead, both for the school that’s right for your child and how to reduce the cost!

Lesser known and unclaimed scholarships

Here’s a thought: Learn to throw the javelinUS News and World Report – Education points out that “less popularized, legitimate sports in the college arena can also earn students similar hefty scholarships.” Boxing, bowling, surfing and marksmanship are just a few, women and men encouraged. Click through the many links on the site, then click more. Finding a significant scholarship is worth the effort.

Another site is 100 Unique and Weird Scholarships Worth Applying For (2016). Another one is a simple Google search I did in my town on Unclaimed scholarships in Beverly, MA. I was on one of those Beverly boards looking to give education money away – we had no applicants one year!

A shoutout for your local school

Massachusetts has lots of college choices. Check out the mass.gov site for our rich list of state colleges. You may be surprised at the depth, variety and value of our Commonwealth schools.

My candidate for best underappreciated school is Salem State University. Number one daughter, a high school junior, has been interested in a hospitality degree and has worked summer jobs (barrista) for four years now. After I checked out the SSU annual cost, room and board, of $19k and looked at the curriculum, I became a fan. Courses in the hospitality degree include math, public speaking, science lab, law,  and computer literacy, among many others.  Sounds like good life preparation to me.

On the other hand, if you must have a private education, then consider Harvard Extension, The Best Kept Secret In Higher Education.

Money for your younger kids they will never pay taxes on

Want to give your kids a lifelong financial advantage? It’s easier than you think. Consider opening and funding a Roth IRA for your child now. For this one your child should be eight or older. It has to be believable to the IRS and to your accountant. Here’s how it works.

Most children are capable of doing chores and getting jobs by the age of eight.  The work can be outside the home, such as babysitting or dog walking, or around the house like yardwork or cleaning.  Consider paying your child the national federal minimum wage of $7.25 per hour.  At that rate a child could easily earn $1000 to $3000 per year.  You, the parent, then establish a Roth IRA for the child and contribute the amount earned each year, investing it for long term growth.  By the time your youngster is 25, you may have put $25k into the Roth, and it may be worth $50k or more.

Thirty-five years later, with seven percent annual growth and no further contributions, the Roth could easily be worth more than $600K, with no taxes due on withdrawals. How’s that for a nice retirement gift for your child?

John Osbon – josbon@osboncapital.com


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