Funding Kids Educational Expenses
Wanting to provide Funding for Kids Educational Expenses is perfectly natural, but doing so before you’ve saved adequately toward your own goals can be a major financial mistake. The college financial-aid system effectively penalizes you for saving money outside of retirement accounts and penalizes you even more if the money’s invested in the child’s name. This concept may sound selfish, but financially speaking, you need to take care of your future first. Take advantage of saving through your tax-sheltered retirement accounts before you set aside money in custodial savings accounts for your kids. This practice isn’t selfish: Do you really want to have to leech off your kids when you’re old and frail because you didn’t save sufficiently for yourself?
Saving for Big Purchases
If you want to buy a car, the latest smartphone, and a plane ticket to Thailand, do not, I repeat, do not buy such things with consumer credit (that is, by incurring and carrying debt month-to-month to finance the purchase on a credit card or auto loan). As I explain in , cars, boats, vacations, and the like are consumer items, not wealth-building investments, such as real estate or small businesses. A car begins to depreciate the moment you drive it off the sales lot. A plane ticket is worthless the moment you arrive back home. (I know your memories will be priceless, but they won’t pay the bills.)
Don’t deny yourself gratification; just learn how to delay it. Get into the habit of saving for your larger consumer purchases to avoid paying for them over time with high-interest consumer credit. When saving up for a consumer purchase such as a car, a money-market account or short-term bond fund is a good place to store your short-term savings.
Paying for high-interest consumer debt can cripple your ability not only to save for long-term goals but also to make major purchases in the future. Interest on consumer debt is exorbitantly expensive — upwards of 20 percent on credit cards. When contemplating the purchase of a consumer item on credit, add up the total interest you’d end up paying on your debt and call it the price of instant gratification.
Preparing for Retirement/Financial Independence
Many people toil away at work, dreaming about a future in which they can stop the daily commute and grind; get out from under that daily deluge of voice mails, e-mails, text messages, and other never-ending technological intrusions; and do what they want, when they want. People often assume that this magical day will arrive when they retire or win the lottery — whichever comes first.
I’ve never cared much for the term retire, which seems to imply idleness or the end of usefulness to society. But if retirement means not having to work at a job (especially one you don’t enjoy) and having financial flexibility and independence, then I’m all for it.
Many folks aspire to retire sooner rather than later. But this idea has some obvious problems. First, you set yourself up for disappointment. If you want to retire by your mid-60s (when Social Security kicks in), you need to save enough money to support yourself for 20 to 30 years, maybe longer. Two to three decades is a long time to live off your savings. You’re going to need a good-sized chunk of money — more than most people realize. The earlier you hope to retire, the more money you need to set aside and the sooner you have to start saving — unless you plan to work part-time in retirement to earn more income!
Many of the people I speak to say that they do want to retire, and most say “the sooner, the better.” Yet more than half of Americans between the ages of 18 and 34, and a quarter of those ages 35 to 54, have not begun to save for retirement. When I asked one of my middle-aged counseling clients, who had saved little for retirement, when he would like to retire, he deadpanned, “Sometime before I die.” If you’re in this group (and even if you’re not), determine where you stand financially regarding retirement. If you’re like most working people, you need to increase your savings rate for retirement.
Thanks for reading Funding Kids Educational Expenses, you can also Read previous topic in this series Saving to Buy a Home or Business
More resource at steps-to-plan-childs-education