The Pandemic Has Changed How Parents Save for College - Here’s How to Get Back on Track

By: Ann Arceo

As parents, we want what’s best for our kids and education is top of the list for many of us. Of course we had no way of knowing that this year would disrupt and change so many of our plans. From an economic downturn to school closures, 2020 is a year we won’t soon forget. As we’ve scrambled to adjust our family routine to make this school year work, it can be easy to put off planning for a future goal like college that’s years down the road. 

If you can relate to that feeling, you’re not alone. A recent CNBC article highlighted a survey showing “16% of parents saving for college paused their contributions” while 13% reduced contributions and 17% planned to withdraw funds” because of financial concerns due to the pandemic. Worrying about your finances during this time is certainly understandable, but the one rule parents should keep in mind when saving for college or any major financial goal is that time is one of your biggest assets. By starting early, you’ll ultimately need to save less given that your money will have time to grow. So if you’ve started saving and stopped or even if you haven’t started saving at all, the 4 steps below can help you make a plan and get on track. 

Set up a 529 Plan 

A 529 Plan is a college savings account that offers special tax benefits. You contribute to the account with after-tax money. As the account grows, earnings are tax deferred and withdrawals are tax free as long as you use the account to pay for qualified expenses related to education. Each state offers their own 529 plan, but that doesn’t mean you’re limited to your state’s plan. 35 states offer an income tax deduction or tax credit for residents who contribute to the state’s plan. You should consider not only the state income tax deduction but also the fees that the plan charges as high fees can hurt the growth of your savings. 

Most plans make it easy to invest the money you contribute by offering age-based investment options that will automatically become more conservative as your child nears college age. There are several other features that make 529 plans an attractive option such as the fact that there is no age limit for using the money in your account so it could be applied to graduate school if your child continues their education. 

The drawback of a 529 plan is that in order to avoid taxes and penalties the funds must be used for qualified expenses. If your child decides not to go to college you can change the beneficiary on the account making the funds available to a sibling. Also, taxes and penalties will only apply to the growth on your account, not the principle balance. For example, if you contribute $10,000 to a 529 plan and it grows to $12,000 then you have $2,000 in earnings on the account which could be taxed and penalized if the funds are used for something other than qualified college expenses. 

Start Early & Make Saving Automatic

There is no denying that college is expensive, and that doesn’t seem likely to change anytime soon. It can feel overwhelming to think of saving thousands of dollars, but if helping your child pay for school is a goal on your list then starting early and saving consistently can make a big difference. As a mom of a 2 and 4 year old, I get how hectic life with little ones can be. Try to set aside a little time to establish your child’s 529 plan and set up an automatic contribution and investment. For example, you could set up a $50 monthly contribution (more or less depending on your goal and budget) that automatically pulls from your checking account, goes into the 529 plan, and is then invested in the age based investment option. You could increase the contribution amount each year as your income grows. This will make saving easy and automatic and before you know it you’ll be well on your way to funding your child’s education. 

Don’t Let Your College Savings Fund Become Your Emergency Fund 

No parent who has worked hard to establish a college savings fund for their child wants to dip into that fund to pay for an unexpected expense. In order to avoid that scenario, It’s important to prioritize saving for an emergency on top of building a college savings account. Be realistic about your budget and what you can afford to save for college. Paying down high interest debt, building a solid cash cushion, and saving for retirement should also be priorities. 

Set a Goal & Review it Regularly 

Saying that you’d like to pay for your child’s education is a wonderful dream, but if that dream is ever going to come to fruition then you need an actionable plan. There are several online college savings calculators like this one from SavingForCollege.com (https://www.savingforcollege.com/calculators/college-savings-calculator) that can help you set a savings goal and research 529 plans. 

Here at Rooted Planning Group, we also work with clients to help them with college planning from setting up an account, to selecting investments, to determining how much you should save. Whether you’re in the newborn days of parenting or navigating the teenage years, we can help you build a plan that will work for you and your family to make your financial goals a reality. 

About Ann Arceo: Ann Arceo has been working in the financial planning industry for over 10 years. She began her career in financial planning at PartnersInWealth, a wealth management firm based in Houston, Texas, which caters to high net worth clientele. She worked with the firm’s president to develop a new method of training to help advisors learn to deliver technical financial plans in an easy, "plain English" format that clients would understand.

​She then worked for LPL Financial, an independent broker dealer, where she earned her Series 7 & 66 securities licenses. She worked alongside a branch manager creating financial plans, account summaries, and investment performance reports for high net worth clients.

Ann also has a passion for writing, and her financial articles have been featured on Investopedia.com, a website which has 20 million unique visitors per month. She has also written for ReadyForZero.com, BudgetTracker.com, and has been quoted in articles for Forbes and U.S. News & World Report.
 
Ann holds a bachelor’s degree in Business Management from the University of Houston, Victoria. She lives with her husband and two children in Fort Collins, CO. They enjoy spending time with friends, hiking, and of course planning their financial future together.

Summer Staycation

In Pre-Covid times many of us would be enjoying or planning a summer vacation. I had originally looked at this month and planned to write about summer vacations, saving for them and the importance of enjoying your money and your time. Just as summer plans have shifted, I thought I’d shift to talk about ways to enjoy the opportunities for entertainment and relaxation you can find around you.

This may be your summer to save money. Being forced to stay close to home opposed to taking the big vacation should cost less. You could use those extra funds to put towards another financial goal or take those funds and add to next year’s vacation fund for a bigger dream experience. Even if you did not have a vacation planned it is still summer and you want to take advantage of the weekends.

So what do you do? You have the time off, might be tired of being home after self isolating for months, but still want to maintain social distancing. Following are a list of places to consider exploring, maybe you’ll find a treasure close to home you have experienced before.  I am located in Western, NY so I am going to share some local experiences I have been encouraged to check out. Let me know what you find in your area! 

• State Parks - Last summer I wrote a blog “Summer In the Park” sharing information about the New York State Park system. This is still one of my favorite go to options for an easy, frugal day out surrounded by natural beauty. A quick tip to find a park near you is to use Google Maps. Zoom out and type in the search bar the type of park you’d like to find (local, county, state) and they will be marked for you. 

• Wineries - I am blessed to be in the Finger Lakes region and we have beautiful vineyards. You do not have to be a wine drinker to enjoy this, seeing the operation and following the trails to see the scenery is a fun outing. One excursion in our area is the Seneca Lake Wine Trail, mapping out a journey to follow. 

• Museums - There are going to be more restrictions on visiting indoor locations so I recommend calling ahead to see if you need to reserve a time to visit. In nice weather you can also visit outdoor museums and historical sites. Right down the road from our primary Corning office is the Corning Museum of Glass and The Rockwell Museum of Art. A little further away we really enjoy the Rochester Museum and Science Center. Outdoor sites - Again right in Corning is Heritage Village and a little further away one of my favorite destinations is the Genesee Country Village and Museum. 

• Hiking Trails - Free to explore and likely easier to avoid people! A quick google search should bring up local trail maps. Please be safe and take a hiking partner. The Finger Lakes Trail runs right through my town, there are over 1,000 miles of trails so there are many opportunities to find a small section to hike. 

Use this summer as an opportunity to explore life in a way that may be different for you. See what your area has to offer. With conditions and requirements changing regularly I do encourage you to call or visit the website of where you plan to go beforehand to be aware of any closures or requirements they may have.

This is a summer to reconnect with your local community, and remember Amy’s saying, “Life is about events, supported by your dollars and cents.”

Uncork Your Wealth - Discover the Difference Between HSA and FSA

In this week’s blog, Financial Planner Kerrie Beene, CFP® defines two benefit terms that often cause confusion:

The products available to us in the financial and healthcare industry can be confusing.  So, with the use of Health Savings Accounts (HSA’s) and Flexible Spending Accounts (FSA’s), we are combining the two worlds and this can be overwhelming when trying to pick a health care plan.  Healthcare plans vary from job to job and state to state, but most of the time the options include health care plans with HSA’s and FSA”s as one of the available plans, along with other plans. So what is the difference and should I choose one of these options?

Similarities 

• Both HSA’s and FSA’s are used in conjunction with your health care plan.  

• Both also reduce your income tax liability and help pay for medical expenses with pre-tax dollars

• You and your employer can deposit money into the account

• Debit/Credit Card offered to pay for expenses

• Must maintain receipts and records for expenses

Health Savings Account

• Used in conjunction with a High-Deductible Plan

  • For 2019, the IRS defines a high deductible as $1,750 for individuals and $2,700 for a family 

  • For 2020, the IRS defines a high deductible as $1,800 for individuals and $2,800 for a family

• Available to self-employed individuals

• Money deposited into the HSA is tax-deductible

  • Interest and earnings are tax-free 

• Withdrawals used to pay for medical expenses are tax-free

  • Withdrawals can be used for medical expenses, such as doctor visits, hospital stays, eyeglasses, contacts, dental procedures, prescription drugs, etc.

• HSA’s are portable

  • The account belongs to you 

  • You keep it even if you switch jobs

  • Money remains in the account from year to year, even if not used

  • Money can be invested within the account

• HSA funds can be used to pay insurance premiums if you are collecting federal or state unemployment benefits or you have COBRA insurance through a former employer

• The IRS also imposes contribution limits on the amount that can be deposited into an HSA account

  • For 2019, the maximum contribution is $3,500 for individuals and $7,000 for families, with a $1,000 catch-up amount for those 55 and older (including employer contributions)

  • For 2020, the maximum contribution is $3,550 for individuals and $7,100 for families, with a $1,000 catch-up amount for those 55 and older (including employer contributions)

Flexible Spending Account

• Used in conjunction with a Health Care Plan

• Not available to self-employed individuals

• Money deposited into the FSA is tax-deductible

• Withdrawals used to pay for medical expenses are tax-free

  • Withdrawals can be used for medical expenses, such as doctor visits, hospital stays, eyeglasses, contacts, dental procedures, prescription drugs, etc.

• FSA’s are not portable

  • The account belongs to your employer 

  • Money must be used by the end of the year or you lose it

    • There are a few exceptions some employers offer, such as being able to carry-over $500 or a 2.5 month grace period to use the funds. (Employers can offer either option, but not both)

• The IRS also imposes contribution limits on the amount that can be deposited into an FSA account

  • For 2019, the maximum contribution is $2,700 

  • For 2020, the maximum contribution is $2,750

• Employers often offer other types of FSA accounts 

  • Dependent Care Account - used to pay for eligible child and adult care expenses like daycare, before and after school care, nursery school, preschool, and summer day camp

  • Other FSA Accounts

    • Adoption Assistance

    • Transit and Parking

The most important things to do when trying to pick a health care plan:

• Understand your available options

• Know your annual healthcare expenses

• Understand the requirements for required documentation for tax purposes

• Don’t be scared to ask questions

Fraud Protection and Simplifying Your Life

Did you know that this week is both fraud protection and simplify your life week? I don’t know about you, but I feel like this is a contradiction of terms. It seems that in order to protect myself from fraud, I have to create very complex passwords, wary of whom my information is going to, and often increasing the complexity of my life. In this week’s edition of Monday Morning Quarter-Buck, Financial Planner Becky Eason (aka Partridge) discusses how to marry these two concepts.

By: Becky Eason

For many years now it seems that there are non-stop scams going around. Have you ever been a victim of fraud or identity theft? If you have, you’re not alone. If you haven’t been, then hopefully we can help you reduce your chances of having to go through that.

Simplifying will help you with so many aspects of life, including those that you may not have ever imagined. Stress is a very serious condition, often caused by being overwhelmed. I know that for myself that if I see clutter around me I get stressed and frequently ask myself “Where do I even start?” A great way to start simplifying, is to get in the habit of filing away papers/receipts that you know you will need, throwing out papers that you don’t need (but make sure there is no personal information on them), and shredding the papers with personal information that you don’t need.

Doing this will not only help with the overwhelmed feeling but it will also increase your security. For the papers that you need to keep, put them in a secure place, such as a locked filing cabinet. If you have documents that require extra protection you could consider a fire-proof safe, or a safety deposit box at a local financial institution. With having these documents in a secure location you are minimizing your risk for fraud.

Pertaining to documents, please be aware of what you are sending across email. It’s very easy for documents to be intercepted by the wrong party. Do your best to not send anything with your social security number, account numbers, or usernames and passwords. If you do have to send these items, you can use encryption to help keep the information more secure. 

Another thing to do to protect yourself from fraud is to change your passwords on a regular basis. It’s so easy to think “I’ll change my password later” but then forget. Maybe you intentionally don’t change your passwords because of the fear and or hassle of forgetting what you changed it to. There are a number of great secure password managers out there such as “LastPass” which allow you to store all of your passwords in a secure vault with just one complex password that you have to remember (and change). If you use a password manager like “LastPass” make sure that your password is very strong, as if someone figures out this password they have access to virtually all of your stuff.

When you take measures to protect your identity it may seem like you are making your life more complicated, but trust me, it’s much easier in the long run to take preventive measures than to need to take legal action. Please be aware of who is asking for your information and why they are asking. If you ever have a suspicion that something doesn’t seem “right” trust your instinct and ask someone you trust. It’s okay to ask why they need it and what they need it for!

Living the "Happy Money" Life

In this week's edition of Monday Morning Quarter-Buck, Financial Planner and CFP® Will Morrison discusses the journey to find happiness, the science of “happier spending,” and how he’s implementing it in his life. Perhaps he will give you ideas on how to implement it into your life?

By: Will Morrison, CFP

There are two things I try to accomplish each summer, my summer reading list and some memorable road trips.  Last year I went to a conference and there was an expert in happiness. The happiness expert had a fabulous presentation of all these different scenarios of things that cause happiness (and things that don’t).  The expert, Elizabeth Dunn, even wrote a book called Happy Money- The Science of Happier Spending. I found her so fascinating that I added her book to my already ambitious Summer 2019 Summer Reading list. Well, with one month or so to go until the kids are back in school (the unofficial end of summer) I have little chance of getting this book read. But I do have an epic road trip planned as a farewell to summer journey!

Some people hate driving, the thought of driving for 12 hours a day sounds pretty brutal. Now add three kids to the mix and some people might find this to be hell on Earth. For whatever reason this is my happy place.  I also find that road trips are a great place to teach kids lessons about money. 

Last year our first major stop on our trip out west was to Fort Mandan, North Dakota which is part of the Lewis and Clark National Historical Trail.  When we got out of the minivan, the kids didn’t run for the log cabins to see the expedition’s living quarters, nor did they run to the giant statue of Lewis and Clark’s Newfoundland. Nope, they went right for the gift shop! “Dad, can I get this?” “Dad, I want one of these!” I really don’t know how it hit me, but at that point I thought to myself that I needed to find a way to keep them from asking to buy something at every gas station and tourist stop on our vacation. 

I’d read a few books in the past on parent’s being overbearing with how kid’s spend their money and I wanted to allow my kids to have free choice over how their money was spent.  I ended up giving each kid $20 each to spend on our 9-day vacation. They were allowed to spend it on whatever they wanted: A Lewis and Clark compass (good choice son!), a stuffed animal purchased at the Lewis and Clark visitor center that had nothing to do with Lewis and Clark (I kept my mouth shut and let middle child get it!), and an assortment of M&Ms, suckers, and soda pop (oh, my youngest…).  How did it turn out? Well by the time we got to Yellowstone 2 days later, my then 5 year-old daughter was out of money, my then 8 year-old son had $5 dollars left, and my then 4-year old candy junky had $13 left. 

At this point it sounds like an absolute failure of an idea, but it worked out pretty well. Having set the expectation that they only had that set amount of money, once the money was gone they didn’t pester me to buy things they didn’t have enough money to buy.  They actually browsed around the Yellowstone gift shop without any expectation of getting something! And one of the most amazing things to me? That dumb random stuffed animal that my daughter bought at Fort Mandan is one of her favorite stuffed animals that she sleeps with every night. 

Stay tuned for this years adventure - we’ll be taking our 2019 family road trip out west at the beginning of August, wish me luck!

3 Things to keep your Money "In Control"

In this weeks edition of Monday Morning Quarter-Buck, Financial Planner Kerrie Beene, CFP® discussed building wealth by keeping your spending “in control.” We all have busy lives and often do the “next thing” that is needed without realizing how much that is actually costing us.

In a recent conversation with a friend, we were laughing about how little we made when we first started our careers. What we lived off of and how did we do that? As our careers have grown and our lives have gotten busier, we focus on what’s important to us at that moment. This has a name - “life style creep.”

Often we are asked, “will I be able to retire with “x” dollars in the bank?” That answer to that question often is based around your desired lifestyle in retirement, in other words, how much do you spend?

Have you experienced life style creep? Here are some tips to help you take control.

By: Kerrie Beene, CFP®
Valiant, Oklahoma

Not sure everyone would admit it, but I bet there have been times when you were paying for something and you had to stand there and wonder if the transaction would go through??  Or when you go shopping and you plan to spend around $200 on your purchase but then once the swiping begins you have no idea how much you have spent but surely it is only like $205 so you should be fine, right?  And then you are wrong and you spent $450! This is mindlessly spending.  

Another way we mindlessly spend is by just ignoring what we spend our money on and how much money we actually have in our account.  With modern technology, most people just login to their bank and check their balance. This gets the job done and can be somewhat managed.  However, it is better when we have more control and some idea of how much we spend on each category. It is still really good to know where your money is being spent.

As a financial nerd, I have tried every way to budget, track expenses, and maintain sanity when it comes to our family spending.  I have tried online programs like mint.com, YNAB, Dave Ramsey’s budget tools, extreme spreadsheets, and I could go on and on. I have made my husband try all sorts of ways to budget and track our spending.  I also have spent time periods where I didn’t budget and didn’t track my spending but this way gives me too much anxiety and makes me feel like I do not have control over our money. And sometimes, being in control is just knowing your true account balance and what you have spent your money on, even if you are broke, at least you are in control.  I do still use mint.com for an overall picture, but here are 3 ways that give me a sense of “control.”

1. Balancing my Checking Account - with current technology, the majority of us do not balance our checkbook.  Heck, some of us may not even know how to balance a checkbook. However, I have found that the task of logging on and balancing my account gives me reassurance that I know what is going on with the money.  Also, if you are married and the one who keeps up with the financial stuff, a simple text or conversation updating your spouse every day or two keeps everyone on the same page.  

   The habit of balancing is something I do normally once per day or every other day.  It really doesn’t take much time when you do it this often. When I get busy and miss 3 or 4 days, that is when I feel out of control.  I may not be out of control, but this is how I feel. And often the way we feel, affects how we spend.  

2. Track Expenses - the second thing that I do that is a little more time consuming is track expenses.  This can be done manually with an excel sheet, plain ole pencil and paper, or you can use an online tool like mint.com that does it for you.  Either way, taking just a few extra minutes each time you balance or even once a week, shows you where the money is going. This gives a sense of control, even if you did not create a budget ahead of time, at least you know where the money is going and who you should be mad it.

3. Have 2 Checking Accounts - the 3rd thing that makes No. 1 and No. 2 go smoothly, is have at least 2 checking accounts.  The 2 accounts we use are one for bills and one for living expenses. This makes it easy to keep up with bills vs. living expenses.  By making sure the bill account has all the money needed for monthly bills we do not have to worry about spending more than we should on living expenses… plus there is no mental math to do when we are busy and login to our accounts.  Mental math has to be done when you have one account and the bills come out but at a later time so you have to figure out what can’t be touched. No one wants to do mental math.

These are three things I have done for years and have helped us stay on track during our busy everyday lives. If you are interested in getting help with any of these 3 things or interested in our Busting Bad Budget Habits class, reach out to us at rootedpg.com or feel free to email me at kerrie@rootedpg.com

The Intersection of Vegetables and Finance

Monday Morning Quarter-Buck

By Financial Planner Becky (Partridge) Eason

Hornell, New York

Did you know that today, June 17th, is national eat your vegetables day? What better time to talk about getting vegetables on a budget! A common misconception is that it’s expensive to eat healthy. There are ways that you can eat healthy and actually save money, especially during the summer if you live in the north.

The biggest way to save money on vegetables is to have a garden. Even for those of you living in cities there are options for gardening available to you as well. If you don’t have a yard you can try small window or balcony planters. Also, many cities offer community garden plots where you can have your own section of a garden to grow what you want. A pack of seeds usually costs in the range of $1 - $3. Think about how many yummy veggies you can grow for $1 - $3, you’ll be well on your way to saving lots of money. Not only do you get to save money but you also get to enjoy the fresh air while working in the garden. The best part is that in the end you get to eat the “fruits of your labor”.

Another way to eat your veggies on a budget is to shop at your local farmers markets and roadside stands. You will likely find fruits and vegetables at a fraction of the cost of chain retailers. Not to mention the fruit and vegetables will be much more fresh and you will be supporting local farmers.

There are also ways to save money on produce at your regular grocery store. For instance, many stores offer “family packs”. These “family packs” are a larger quantity of produce usually sold for a lower price per pound. Remember though that if you know you won’t be consuming the food before it spoils, you won’t be saving money if you have to throw out the extra food.

Eating your vegetables doesn’t have to cost a lot of money. In fact, for a family it’s almost always cheaper to buy your vegetables and cook at home than it is to go to a fast food restaurant, not to mention the health benefits!