Tips to Save Money for My Children – Part III

How can educational grants aid me in this situation?

There is a distinct difference between loans and educational grants. If you are having a tough time, it is safer and better to opt for educational grants. The advantage of grants supersedes the other because if you opt for educational loans, you will have to pay it back. This “pay back” facility can be avoided by opting for educational grants. Am I eligible for an educational grant? Well, that part is decided according to certain guidelines. The average annual earning of the breadwinners (for the family) along with the fee’s structure of the college will be the ultimate deciding factors. Some types of grants will be illustrated in the following sections.

  • Guaranteed Student Loans: The GSL has now been replaced with Stafford loans. The federal government with the aid of the local financial organizations normally grants the loan to the needy. One will have to bear in mind that the loan is normally provided in the form of a subsidy.  If you are eligible for it, you might even check out the non-subsidized version of the same program. The Stafford loans are usually termed as “loans that are based on needs”. In simpler terms, only the eligible will be provided with the loan.
  • Perkins Loans: This is another form of educational grant, which is gaining favor in the minds of many people. Just like the previously discussed Stafford loans, the federal government also provides this loan. In order to provide this grant, the government is noted to work in close tie-up with the schools and colleges. Hence, if you are interested in applying for the same, it would be wiser to contact the school or college administration.
  • Parent loans for undergraduate students: Furthermore termed as PLUS in the financial circles, the federal government will sanction the loan only to the parents. This is in stark contrast of the rest of the other two, which were discussed earlier. Inform the school or college authorities in order to discuss the guidelines for the PLUS program.

Is there any manner with the aid of which one will be able to augment the financial aid rendered to their child?

If you are looking forward to answering the above-mentioned query, here are certain steps that can be considered:

  • The name holder of your assets must not be bestowed to your child: This is seen as a risky situation by many financial organizations.
  • Maintain a clean credit record: It is mandatory to keep the credit score at feasible levels. Banks are noted to scrutiny these scores and will decide the eligibility only if they are satisfied with your existing financial situation. Pay your bills and taxes at the appropriate intervals.
  • Take a straightforward approach: It is imperative to stick with the truth when you are dealing with these officials. Ensure that the authorities are kept in the loop by explaining any/all the financial difficulties experienced by you.

How can I get rid of the taxes levied to the savings, which I had painstakingly collected all these years?

  • Watch out for the taxable income of your child: If possible, always maintain it below $1900. The threshold was $1800 in 2008. The 19-year age barrier must also be taken into thought.
  • US Saving Bonds: As I had mentioned earlier, it is better to opt for this type of bonds as the returns are always to the higher side.
  • Invest on stocks: You should have a clear understanding of the stocks that appreciate and depreciate over the course of years. Invest on those, which are steadily appreciating.
  • Employ your child: Yes, that is true – if you employ your child (at your business), you will be able to skim clear of the “kiddie taxes”.
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Tips to Save Money for My Children – Part II

What are the important aspects of “kiddie taxes”?

Before explaining the concept of kiddie taxes, allow me to explain the situation that led to the issuance of these types of special taxes. There was a time when parents used to opt for investment plans (primarily in the form of stocks) by the name of   their child. Their children could in turn attain profit from the same because of the reduced taxes. However, according to the newly introduced “kiddie tax”, they will have to pay taxes equivalent to their parents. Nevertheless, this policy is only valid until the child reaches 19. Once the age limit is crossed, the tax amount is altered in order to tally with the child’s rate (which, by the way, is lower than the former).

The system was introduced when congress realized how investment options were being misused by a small section of the society.

What are the important features of Education IRA? Am I eligible for the program?

Firstly, it is improper to mention the program as the education IRA as it was replaced some time earlier with Coverdell ESA. The program is straightforward and is primarily intended for those parents who seek to give higher education to their children. It is often considered as an investment option – but it comes with the additional advantage that no form of taxes will be imparted when the program lapses ultimately the parents are bestowed with the entire sum. An age limit of 18 is presently set for this program and once the child reaches the age, the parents will have to stop making the payments.

The payments that are made on the behalf of the Coverdell program must be in cash. No other form of payment is accepted into the program. Many technicalities are associated with the paradigm, and it is hence better to contact an investment expert to understand the underlying concepts. High interest rates are provided over a period of 10 years. In order to illustrate the affectivity of the program, allow me to cite a suitable example. If you start the program by investing just $500, in 10 year’s time the amount might camouflage itself to $5000! Do you realize the potentiality of the program?

Help Me. I was foolish enough not to save any considerable amounts for my child’s college education. What am I supposed to do now?

Well, like they say better late than never! Here are some strategies that can be exercised so that you will be able to make the ends meet by the time your child is about to enter college!

  • Start saving now. Reduce the overall expenditure levels of the house. Start monitoring the bills and lower the consumption levels of household accessories. Never indulge in activities that will part you away from your hard-earned money.
  • Start making extra money. It is better to opt for a second job. I do realize that life is tough, and you will have to work hard to make the ends meet. If viable, allow the child to earn and start a savings bank account for him.
  • As a last resort, you can try for loans or grants, although the chances of obtaining one are slim these days. Maintain a good credit history and you might be given the green signal and ultimately the loan might be sanctioned.

Raising A Child – Part II

What is the approximate cost to be borne by me between the ages one to six?

An additional overhead that will have to be taken into consideration during this period is the cost associated with pre-schooling. According to the type of day care center or pre-schooling institution that is opted by you for the child, you will have to pay $10000 to $12000 (annually). Keep a sharp look out for the terms and conditions listed on the health coverage because you will be able to save considerably (once again), by opting for the right comprehensive package.

What are the costs that should be undertaken between the ages six and twelve of the child?

During the initial years, you will have to be worried about your health care package. However, when the child is nearing 12, he or she will not be prone to diseases (like they used to be). The immunity system of the child might receive that much needed boost during this time, and hence you will have to pay considerably lesser! The main expenses for the child during this stage will be clothing and of course entertainment. Opting for a private school for the child might seem like a bad idea then.

How can I keep a check on the amount spend on my child between the ages thirteen to eighteen?

It goes without an explanation that the entertainment needs of the child increases largely during this time. The child will be aware of the fashion changes occurring in the neighborhood and will compete with their friends to “look flashy”. The food and clothing requirements of the child will surge past the $3000 mark. The same holds true, if the child asks for a car; also please add the cost of the gas along with auto insurance (which must be remitted yearly).

How should I impart money-saving techniques to the child?

Even from a very early age, it is the duty of the parents to generate awareness about money-saving techniques in their child. Never impart high amounts as pocket money because you are inviting more trouble by doing so. Open up a savings account in the nearest bank and make it mandatory to deposit the pocket money or any other extra savings in the bank account. Giving a credit card to the child must be thought about seriously, likewise!

Raising A Child

What is the average cost that is associated with raising a child?

The typical cost for raising a child might vary according to the present economic status of the inhabitant’s country! In other words, it is quite difficult to provide an outline of the costs that might incur to you, while raising your first-born. Economists always work with the aid of estimates – they have lain out certain estimates and in the following sections, we will be looking at an in-depth analysis of the same. As we proceed with this brief discussion, you will realize that rising up a child is not an easy task.

Here is a news flash that might provide some relief to those who are expecting their first child in the coming months – the amounts spend on your first child will be always high. Clothing and other accessories that are being purchased for the first-born can be re-used for the rest of the children. Meticulous levels of planning are desired because you are meant to spend a minimum of $298,680 until the child reaches 17. Once the child is admitted to a college, the cash requirements will soar to even higher levels. If we add additional overheads like paying the mortgage amounts, we are looking at wholesome amounts!

What is the approximate cost that be incurred to me on my child’s first year?

I do not intent to dampen the spirits, but do you know that on an average, you will be charged approximately $8000 for a normal delivery? Of course, you will never have to pay the entire cost – yet you will have to realize that insurance companies might impose at least 30% of the said amount. Once the baby is taken to the home, the real expenditure starts.

The costs of baby layette are always on the rise. If you have bestowed the same upon someone else recently, you might have a rundown of the associated charges. Experts have put this cost at $1200 – include the cost of the crib and other accessories like the table used for changing the nappy in this $1200. Once into the open market you will realize that baby clothes happen to be highly expensive and at a minimum, you will have to spend approximately $300 for your newborn child. We must never forget the high chair or the infant car seat that is also mandatory for “housing” the baby properly!

Subsequently, we will consider the cost of baby foods. One might realize that baby foods are available in two forms – the ready to serve and the other kind that will require you to spend some time preparing it. On an average, the yearly cost of baby food might be around $1200; but this is highly dependent on the type of food opted for the child. By that time, you will be investing on lots of feeding bottles and nipples for these bottles. The clothing of the mother must be altered to incorporate additional “facilities” to breast-feed the child at appropriate intervals.

Quit gasping, because more is yet to come. The diaper costs for the very first year might run to approximately $800. Well, this can be grouped with the baby food category; according to the brand, the costs might rise or fall. One will have to consider the day care facilities, which might be around $12000 annually. It is better not to seek the aid of nannies, for the time being,   because they usually work out to be highly expensive than day care centers. This is primarily due to the “individual undivided attention” imparted to the child.

Well, hither is another news flash; $50+ must be paid every time the baby is taken to the hospital for the monthly checkup routines. As mentioned earlier, insurance companies might provide relief under such strenuous conditions. HMO is the best manner to proceed with because you will be forced to shell out a maximum of $10 per visit to the doctor. Medicines are not free, so are the charges related to handing out a prescription for the child. The baby is going to spend a certain duration alone with his toys, oh – did I forget to mention that? Please add in the cost of the toys, and you are looking at approximately $500.

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