As millions head back to school, this is a good time for advisors to connect with their clients. It's a good time to connect with their clients' children. It's a good time to review financial plans.
Yes, it's a good time to discuss 529 investments, but it's a teachable moment as well, to build bridges to multiple generations.
Helping children, from an early age, to learn about budgeting and to understand how much things cost — think of all those new clothes and supplies needed for each new school year — will help them navigate the world through college and beyond.
There are also changes to take note of, such as the now-lower interest rates on federally subsidized student loans, and strategies that advisors and their clients need to brush up on.
Consider a TD Ameritrade survey of those ages 13 to 22, dubbed Generation Z (don't ask us what comes next), that found that about half said their biggest concern was paying for college. That's a 10 percentage-point bump from 2012. Still, nearly two-thirds say a college education is essential for success.
There are tools you can suggest to your clients for keeping track of their most precious asset — their children — and ways to help your clients save money in the back-to-school shopping season and beyond.
Take a look at the following pages for information and suggestions that can help your clients and strengthen your relationship with them.
1. Student Loans
The cost of college can be a drag on any financial plan. Fortunately, recent action by Congress offers good news for those paying for school with loans. Undergraduates will get the most benefit from the law, which sets the interest rate at 3.4% for the coming school year. That's a cut of 50% from last year. In the future, the interest rate will be tied to the market and will be capped.
Despite the decrease, the Congressional Budget Office estimates the federal government will make $50 billion on student loans this year. U.S. News & World Report explained how some critics decry the profit, saying it adds to the burden on students to pay for tuition, which has spiraled upward for decades.
One other overlooked way to pay for a child's education: get a job at a college or university. Most schools will cover the cost of an employee's child's tuition (and the employee, for that matter), regardless of the position the employee holds. In addition, many have reciprocity arrangements with other colleges and universities, so the employee's child may be able to attend another school for free. However, "free" means tuition — the largesse does not extend to room and board or fees.
2. Watching the Pocketbook
Parents of children from kindergarten through college deal with the annual back-to-school buying craze. The sales are advertised even as the last semester seems to have barely ended (a PriceGrabber survey says a third of shoppers said they'd start stocking up in July). Sales at stores like Staples trumpet ways to soften the hit to the pocketbook.
PriceGrabber's survey found that the most popular way (50% of respondents) to save was hit the discount stores. Fabulous & Frugal offers a tip for keeping the clothing budget down: swap with other parents in the same boat. One tip that you might offer clients to save is to go though closets to see what can be used for the new school year. Well under half (37%) of the respondents in PriceGrabber's survey said they planned to do so.
Now, if your clients had a very good year financially, they could spring for a little extra to make their children stand out. How about replacing that faithful, yellow, Ticonderoga No. 2 with the Perfect Pencil from Faber-Castell? The price of "perfection?" Just $425. But it is self-sharpening.
3. Finance 101
Handling money is an important skill, and the CFP Board's consumer advocate, Eleanor Blayney, advises parents to start teaching their children early the basics of making a budget, keeping credit-card and other spending within reasonable limits and other essentials. Instilling best practices early just might save a lot of angst later on.
Advising your clients to help their kids master these skills can help cement a bond that goes beyond mere discussions of investment strategy.
5. Gadgets
6. Saving for College
