Financial Education

There are many ways to financially prepare for your children’s college education, but the sooner you start saving, the better.

Even modest savings can pack a punch if you give them enough time to grow. Investing just $100 a month for 18 years will yield $48,000, assuming an 8 percent average annual return. You can find out how much money you can start saving by creating a budget.

529 Plans
Consider 529 plans, named after section 529 of the Internal Revenue Code, which are investment accounts operated by state or educational institutions and are designed to help families set aside funds for future college costs. You can deposit as much money as you want each year. The account grows based on market returns. New York State has its own 529 College Savings Program.

529 plans are usually categorized as either prepaid or savings plans.

• Prepaid Plans let you pre-pay all or part of the costs of an in-state public college education. They may also be converted for use at private and out-of-state colleges. The Independent 529 Plan is a separate prepaid plan for private colleges.
  
  Savings Plans work much like a 401K or IRA by investing your contributions in mutual funds or similar investments. The plan will offer you several investment options from which to choose. Your account will go up or down in value based on the performance of the particular option you select.

Educational institutions can offer a 529 prepaid plan but not a 529 savings plan (the private-college Independent 529 Plan is the only institution-sponsored 529 plan thus far).

Coverdell Accounts
The Coverdell Education Savings Account (ESA) is also an investment account where the assets are used for college expenses. You can usually set an account up at almost any brokerage firm or financial institution. It is similar to the 529 College Savings Plan in that it has investment options where you decide what to buy and sell in order for your account to grow.

Grants and loans
Don't leave any stone unturned when looking for college education financing. Federal, state, and private grants and loans can bridge the gap between your savings and tuition bills, even if you think you make too much to qualify. Of critical importance is completing the applications for Free Application for Federal Student Aid, or FAFSA, to determine your eligibility for federal and state grants and work study.

Only borrow federal loans after you've explored and taken every opportunity to use grants and scholarships. Federal student and parent loans have low, fixed interest rates and flexible repayment plans if you face hardship. Stafford, Perkins and PLUS loans are the three types of federal loans.

Tax credits
When completing your tax return, you may be eligible to take two federal tax credits - the Hope Credit and Lifetime Learning Credit - in the years you pay tuition.

Buying a home is the largest purchase most people will ever make. Homeownership has great benefits but also comes with certain responsibilities. You need to answer the question, "Are you ready for homeownership?"  You need to take a look at your current situation and determine if:

• You have a steady, reliable source of income and a steady employment history for at least two years
• You have a credit history
• Your total debt is manageable and you can afford to take on the costs associated with homeownership
• You have money saved for a down payment and closing costs or you have access to other sources of funds, such as an employment bonus, tax refund, or a gift from a relative
• Think about your future plans that might affect your ability to manage the costs of homeownership

Other considerations to factor into the equation are:

• Whether you need to make lifestyle changes that might include not taking expensive vacations or purchasing luxury cars, and dining out less
• The costs of a growing family when looking at your homeownership budget
• Whether your future plans might include a wedding or college education for yourself or your children

And remember, the mortgage is not the only bill you'll be footing. Homeownership comes with other potential budget items such as repairs, maintenance, taxes and possibly, landscaping.

Many government agencies, banking institutions and local non-profit organizations want you to succeed in purchasing and owning a home. Homeownership assistance programs can provide down payment assistance and homebuyer education for first-time homebuyers, moderate-income people, teachers and armed forces service members, for example.

To find out more about government resources, go to U.S. Department of Housing and Urban Development (HUD) and State of New York Mortgage Agency (SONYMA).

Once you fully understand your current situation, your future plans and the big picture in terms of homeownership, it’s important to look at the pros and cons of homeownership before making the best decision for you and your family.

Developing a spending plan and opening a bank account are critical steps to a better understanding of where your money goes. A bank account can also help you track finances so you become more aware of your spending and spending habits, and can make changes toward better money management.

We explain how to develop your personal household budget, discuss the benefits of having a bank account and walk you through the steps of opening your new account.

You may question how you're going to juggle your day-to-day expenses with your desire to save for your child's college education, if not your own retirement. Or you may be concerned about how to pay off credit card debt.

Owning a home can be one of the most valuable investments you make. Learn about tools and resources and what questions to ask to help you make decisions. The last thing any homeowner wants to think about is losing the family home, especially with foreclosures on the rise locally and nationally. Potential home buyers should be aware of mortgage pitfalls and scams, particularly in this economy.

The topics below touch upon establishing household budgets, starting savings plans, managing debt and strategically investing for retirement and long-term expenses such as college education. We've selected a range of information and resources that we hope will assist you in making sound financial decisions for you and your family.