News and Opinion about Millennials surrounded by fintech & insurtech + Opinion by S. Ernest Paul

The skin in the game – from a financial advisor

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The value of ‘skin in the game’

A financial planner sees clients who want to tap their retirement savings to cover college costs — which can spell big financial trouble later in life. “There are loans available for paying for college. There are no ‘retirement loans,'” he said.

“I also believe that kids will take success (graduating) from college more seriously if they have some skin in the game, so to speak. If they bear none of the costs, they may not take it as seriously.”

Your top savings priority should be for your own retirement. Save at least 10 percent of your income in an employer-sponsored plan such as a 401(k) or a tax-advantaged individual retirement account, advisers recommend.

Next, open a college 529 savings plan. Like your 401(k) or IRA, a 529 plan can grow your money much faster than an ordinary savings account would. That’s why putting in even a little bit soon after your children is born is much better than waiting until you can put in more, as you have nearly 20 years to let compounding do its magic.

As your children get closer to high school, start including them in discussions and set realistic expectations about how much you can afford to help.

Look at how much you have saved, and the picture of how much you can help begins to take shape. Your child’s choice of schools and whether your family qualifies for financial aid will determine how big a student loan your child might need.

Besides targeting academic and athletic scholarships, there are other factors that advisers say students and their parents can consider:

Apply for financial aid (aka free money): Applications for the Free Application for Federal Student Aid , or FAFSA, opened Oct. 1 — the earlier you file, the better, as deadlines may vary by state or college in order to qualify for aid next fall.

Attend community college first: Community college for the first couple of years is a low-cost way to start your education before transferring to a public or private university.

Put a GPA requirement on parent contributions: Agree to a sliding scale of contributions based on your child’s academic performance and your budget.

Split allowance with college savings: As your children get older, split their allowance so that half they can spend and half goes into their college fund.



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