Sunday, August 31, 2014

Let's Ask Grandpa and Grandma

Recently the investment firm Fidelity Funds performed a survey among its older investors and had some interesting findings regarding grandparents.

A growing number of grandparents are getting involved in helping for their grandchildren’s higher education, the study says. From decision making to actual saving, they are saying “We’re here to help”.

53% of grandparents are already savings or plan to start saving for their grandchildren’s college costs, and 90% consider it likely to happen.

With the rising costs of higher forms of education, most families have to sit down, talk, and plan a manageable method for raising the money for their children’s future education needs.

Nowadays, families are including grandparents in some investment and decision-making discussions, and this seems to help grandparents have greater interest in the welfare of their families overall. So when the talk turns to saving for your kids’ college, consider asking grandpa and grandma to sit at the table with you.

If you are a grandparent and reading this, the same applies to you. Talk to your children about getting involved. There are several ways that you can help.

To help save for actual tuition expenses: 529 plans

There are two kinds of 529 plans. The first kind is offered by state governments and higher education institutions. They allow you to invest in the tuition of a specified beneficiary by purchasing tuition credits at today’s rates that will be set aside for the future, for when your beneficiary goes to college; their benefit is that they skip inflation and the future rises of tuition costs that the school will apply. This means that 3 credits purchased today will be 3 credits when your grandchild needs them, regardless of what they cost when he or she needs them. These plans have some tax advantages, but have the drawback that they must be used in the state or institution from which you purchase them.

The second kind of 529 plan is a savings plan that has an underlying form of investment, such as mutual funds. Their performance is based on asset allocation performance, and they work like personal retirement investment accounts, where one should strive to invest more aggressively earlier on, and more conservatively as the student gets closer to college age.

You may invest on a 529 savings plan through one OAS Staff FCU’s financial partners, Cetera Advisor Networks and Oppenheimer & Co. To find out more about them and to contact them, visit the Credit Union’s Investment information page.

To help save for other needs: UTMAs

An Uniform Transfer to Minors Account or UTMA is an account that an adult opens in the name of a child, and that becomes joint property of that child when they reach the age of 18 (in other states this age might be 21, check your state’s law for specific information). The adult who opens the account becomes its custodian, and is responsible for administering it until that time. The funds in the account are an irrevocable gift to that minor once he or she comes of age.

OAS Staff Federal Credit Union offers these accounts. They work as a regular membership, and you are able to asset up automatic monthly transfers, payroll deductions and any other methods to perform regular deposit into it. Once you have accumulated enough funds in it, you can also invest on share certificates to make the return on your grandchild’s future more productive.

While these accounts do not offer the tax benefits of 529 plans, remember that your grandchild will need funds for non-tuition expenses where he or she goes to college, from room and board to everyday expenses. Every bit will help.

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