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On August 28, 2004 Dan Plante of KUSI News interviewed
Barbara Williams on the topic of College Planning. The following is the
transcript of this interview.
Dan
Plante – Ah yes, but you don’t have to take out a loan to go to college.
Joining us now is Barbara Williams from Financial Focus on how to make safe
investments and strategies for basically planning for our kids college
education. Good morning Barbara.
Barbara
– Good morning Dan!
Dan
Plante – First of all lets start with the cost of college. What is the
average cost for college for both public and private.
Barbara
– For private schools in California right now average cost is $35,000 and
for public schools its $15,000.
Dan
Plante – Each year?
Barbara
– Each year.
Dan
Plante – So for a lot of families that is a very tough tough nut to crack.
Barbara
– Yea – that can be a very expensive thing and so the sooner you get
started the better.
Dan
Plante – Exactly. Speaking of which, how soon should we start?
Barbara
– ‘Bout time the baby is conceived!
Dan Plante
– (laughter) That makes sense.
Barbara
– If you start with a child, a new born, you need to start saving at least
$100 per month right from the get-go. If you’re starting, say with
pre-schoolers, I just did a plan for a client with a six year old and a
three year old and they need to be saving $1,000 per month having started
that late.
Dan
Plante – Oh my gosh! Alright, let’s talk about which investment might be
the best investment. There are a lot of things out there from property to
stocks to mutual funds and things like that. What are you suggesting?
Barbara
– Well with the younger ages you want to go more aggressive with stock
funds and as the child gets older you want to start going into more
conservative so that you’re not experiencing a down market at the same time
that you need your tuition funds.
Dan
Plante – Yea. I mean wouldn’t it… To me just says… The stock market says…
The stock market is not a sure thing. I mean you could end up losing a lot
of money.
Barbara
– Yea, it’s certainly not, but if you’re starting young and you’re putting
money in on a regular basis, which is called Dollar Cost Averaging, then
you have the advantage of buying in on the down cycles. So if you’ve got
ten years to work with then you really have the ability to ride through
some cycles and historically you make more money in the stock market than
on the guaranteed investments.
Dan
Plante – Very good. Tax considerations – I know that there are some tax
breaks and some tax issues when you’re investing in college.
Barbara
– Fortunately the government wants to help us save for college. So there
are various vehicles, there are 529 Plans, Coverdale Education, Uniform
Transfer To Minors. And the newest ones, the 529 and the Coverdale really
work a lot like a Roth IRA where you’re putting in after tax dollars but if
you pull them out correctly they are never taxed again. So that’s a huge
advantage.
Dan
Plante – So these are government funds?
Barbara
– These are not government funds. But…
Dan
Plante – These are private funds?
Barbara
– These are private funds. The 529 Plans are offered by major mutual fund
companies. And that’s really the vehicle of choice right now - the 529 Plan
which offers the most flexibility you can put a lot of money into it and if
its used for college education the money is pulled out tax free.
Dan
Plante – Yea. Do you ever… Do you ever say invest in real estate? Property?
Barbara
– You certainly can. That requires much larger up front money to get in and
requires some flexibility and timing on how to get out of it. So again
that’s one of those things you need at least ten years to work with.
Dan
Plante – Yea.
Barbara
– You don’t want to take your high schooler and put their money in real
estate right now.
Dan
Plante – For… For the people who might be sitting at home right now who
have kids going into Junior year of High School or something and they still
haven’t saved any money – What do you say to them? Say "Oh my gosh, my
college is two or three years away. What do I do now?"
Barbara
– Well at this point you need to be very conservative in what you invest.
And you need to be a really good squirrel and just try to put away every
dollar that you can. But you also need to start looking at your other
alternatives too. So looking at your child and what activities can they get
into which would make them a better candidate for scholarships and grants
that might be out there. And start looking at what colleges provide the
best aid. And there are many coaches that can work with you in that area to
help you find available funds.
Dan
Plante – Because there is a lot of free money out there.
Barbara
– There is a lot of free money.
Dan
Plante – A lot of money.
Barbara
– You really need to guide your child in the direction that makes that
money available.
Dan
Plante – Right. And certain income requirements – some are lower income
families are eligible – you know – so there is a lot of different
requirements that you have to be aware.
Barbara
– Right. Some of them you can’t even control. I went through college on a Welsh
scholarship because my last name was Williams. So its…
Dan
Plante – Really!
Barbara
– It’s a matter of looking at what’s out there and what’s available and
what niches you might fall into to help make money available.
Dan
Plante – Very good. Well some great advice for those people who don’t have
wealthy grandparents that will pay for all their kids college education. We
do appreciate the advice and the reminder of course and to get a hold of
you there’s your phone number 760-431-3040. And your web site is what?
Barbara
– www dot fifo1, number one, dot com.
Dan
Plante – fifo1 dot com. Barbara Williams thank you for coming in Thanks for
talking to us about this important topic.
Barbara
– Thank you.
Dan
Plante – Al right – see you later.
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NOTE:
Dollar cost averaging does not assure a profit or protect against loss in
declining markets. Such a plan involves continuous investments in
securities regardless of fluctuating price levels of such securities and
the investor should consider his/her financial ability to continue
purchases through periods of low levels.
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