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Budgeting: First Car vs. College Tuition

February 27, 2014

By Kevin Rutter

college tuition versus a car

College is a costly but important adventure. For this reason, it’s a good idea to have a conversation with your child about the costs of college as early as middle school. Together you can start researching various ways to finance your child’s degree. One conversation you should have with your child involves options regarding luxury items versus school costs. For example, if your child wants to have his or her own car, he or she might need to take an after-school job or do some work-study while going to college.

Don’t forget to remind your child that there are many ways to pay for college. He or she should primarily learn the concept of budgeting.

A budget is a plan for saving and spending money. Developing a budget is essential for a healthy and happy financial life because it forces one to think about what they really want to have and devise a strategy to get there.

Another important concept of personal finance/economics related to budgeting is the principal of opportunity cost. No one has an unlimited amount of money and therefore one must make choices about how to spend their dollars.

I chose NOT to have a car for almost 10 years and I told my students that I had set a goal to own my own home. The only way I could own a home was by not paying for a car, which I calculated to be about 10 times more expensive than using public transportation. Having a car would cost me the opportunity to own my own home.

This example directly applies to a conversation all parents will likely have with their college-bound students regarding getting that first car or saving for post-secondary school tuition. Crunch the numbers; how much is coming in versus how much is going out.

What is doable given that reality and what is the top priority for the long term? As a family, have this discussion. Keep in mind the budget and the fact that every economic choice will cost an opportunity.

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Finding Scholarships

February 26, 2014

By Judy Razo

Find the tuition maze!

If you have children in grades eight through twelve or in their first three years of college, your child should be applying for scholarships. That’s correct, from the ages of 14 to 21, your child should be applying to about 10 scholarships for every $1,000 of college that you would like paid regardless of how much Financial Aid you think your child will receive.

I know, it sounds like a lot of work and there will be many other things to worry about, like his or her GPA, AP classes, the SAT and ACT, extracurricular activities and even prom. But your child graduating from college with zero or no debt for either one of you will make it all worth it.

So where can you find all of these magical scholarships? You need to dig for them and here’s how:

  • Start local. Many community organizations and local business in the city or town you live in will offer scholarships. Start by asking around at your own place of employment or that of your spouse, friends, and relatives. These may not be huge scholarships but they will be easier to get and small amounts add up in a big way.
  • Go national. Start looking for scholarships from around the country. You can do a simple Internet search for “scholarships” or have your child sign up for scholarship search services such as College Greenlight, BigFuture by College Board, or Fastweb. These services are free and will match your child with scholarships he or she qualifies for, taking some of the legwork out of having to research the scholarships one by one.
  • Go for gold! Cheer on your child’s favorite talents by encouraging him or her to participate in contests and competitions using those talents. There are competitions for many talents such as writing, singing, dancing, sports, and even pageants, to name a few. Many of these contests offer cash prizes or scholarships to the winners—all money that can go toward paying for college.

Encourage your child to apply for smaller scholarships along with large ones. Competition for larger scholarships is a lot steeper than for small ones so the chances of winning a smaller or less known scholarship is greater. However, don’t shy away from big ones like from Coca-Cola or Dell either; you never know what scholarships your child will win unless you try.

Lastly, remember to let your child do most of the work when applying to scholarships but don’t leave it entirely up to him or her. Guide your child through the process, help him or her with research, and always proofread his or her applications. These tactics will help your child learn the process so he or she knows how to apply to scholarships on his or her own once your child has left home for college.

Good luck!

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Final Steps to the College Application Process

February 24, 2014

By Kevin Rutter

A student completes a college application.

With 2014 well underway, many students are completing the final stages of the college application process. I have been receiving daily requests from my senior students for assistance. Here are some of the most important things you can do to help your child cross the finish line and get into college.

Letters of reference

Make sure your student does not leave this step for the last minute. Teachers and counselors have a full plate and it is difficult to fulfill last minute requests to write a great letter of recommendation. Sit down with your child and write a general letter of reference that highlights positive characteristics, academic achievements and extra-curricular activities. This sample letter can then be given to recommenders to guide them and make completion faster.

FAFSA Documents 

W-2 forms are needed to complete the Free Application for Federal Student Aid. This application will determine how much state and federal aid will be available to defer tuition costs and it operates on a first-come, first-served basis. The money runs out, so it is imperative that your child submits the FAFSA as soon as possible and they need your tax information. Most high schools offer parent-counseling sessions during this time of the year to answer questions and navigate your tax situation.

Interviews

Several students of mine are currently having interviews to make the final determination on a scholarship opportunity or admission to an institution. Interviews can be tough, but there are some simple strategies that can help your child feel more confident about them.

  • Practice, practice, practice. Generally, interviews involve the same kind of questions: Tell me about yourself, why do you want to go to school here? Tell me about a time when you were a leader, where do you see yourself in 5 years? Review these questions with your child and help them refine their answers.
  • Make a good first impression. First impressions also play big role in determining the outcome of an interview. Practice shaking hands with a firm grip and eye contact, get your student there at least 15 minutes early, and make sure he or she is dressed for success.
  • Send a thank you note. A hand-written thank you note, sent after the interview, is also a nice touch that can separate your child from the competition.

College Admission Test Prep 

These tests can produce a lot of anxiety. The best way to have your student feel better about them is to do some research about what specifically will be on the exam. Once that is determined, the student can put in some practice time. This is especially important for admission tests that involve timed essays. Getting the timing right takes rehearsal and repletion. Check with the school counseling office to see if there are any practice tests available so that the format and question types can be reviewed.

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How can I teach my children the value of money?

January 31, 2014

By YOU Program Facilitator

Children with piggy banks

Question: My kids think money grows on trees. They think they're entitled to the latest toys and video games as soon as they come out, but I want them to work for nice things and earn them. How do I teach them to appreciate the value of money?

Answer: As a parent, it’s normal to want to give our children everything we can, especially those of us who grew up not having a lot things. We feel we need to compensate, but we have to be aware to not fall into that trap. Create a balance between what you give them and when you give it to them.

One of the first things that your children should learn is the importance of money. They need to understand the difficulties of earning it. Try giving them a certain amount of money for every age-appropriate chore they accomplish. Let them learn that they will only get money if they work hard for it.

Depending on their ages, you can apply the following strategy: suggest that your kids save up to pay half the cost of what they want and you’ll pay for the other half. If they want the item, they should be willing to earn it. Kids need to learn that if they really want something, they should wait and save in order to buy it. This strategy will also get them into the habit of thinking before spending.

Teaching your children how to save and manage money wisely will help them face future financial hurdles. You can even start teaching your children to save when they are toddlers. They probably receive birthday cards with money or checks from relatives during special occasions. Open a savings account for them and let them watch it grow. Have your children set a long-term goal for something more expensive than the toys, candy, or clothes they might have been saving for.

While you are working on helping them understand the value of money, you can use this opportunity to talk to them about the importance of donating to charities. Later in life, they will be in the habit of donating to those in need, which will help them value what they have. What kids learn about giving during childhood will last a lifetime.

Parents are the main influence on their children’s financial behaviors, so it’s our responsibility to raise a generation of conscious buyers, savers, and benefactors.

You can learn more about the issues addressed in this question in the YOU: Your Child's First Teacher book series. For information about teaching your child financial responsibilities, see the Through High School and Beyond book on page 40.

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Gift Idea for Students: the Gift of Saving!

December 11, 2013

By Kevin Rutter

Gift Idea for Students: The Gift of Saving

As a teacher of personal finance I regularly tell my students the most important thing about building a healthy financial life is to save. Expert financial advisors say that 5 to 10 percent of your income is a good number to shoot for, but the more you save, the better. 

There are three basic principals in being successful at saving money:

  1. Pay Yourself First (PYF). This is a strategy to stay disciplined in regularly contributing to a saving plan by paying into it first. Every time a paycheck is earned, take 5 to 10 percent off the top and add it to the savings plan.
  2. Save for the long term. The true power of saving money can only be unleashed when money is saved over a long period of time in an interest-bearing account at a financial institution. Money deposited at a financial institution is also insured by the federal government through the Federal Deposit Insurance Corporation (FDIC) up to 250,000 dollars per account. So, the savings cannot be lost or stolen no matter what happens to the bank. 
  3. Start ASAP. The sooner you start to save, the sooner that money will grow. 

This holiday season provides a perfect opportunity to start educating your student on the importance of savings. Use part of any gift money to open up a savings account for your child and encourage relatives who wish to buy something to do the same. 

Additionally, state governments across the country are encouraging parents to save for their children’s college fund by creating special investment opportunities called 529 plans. There are significant tax breaks for those participating in these plans and other benefits depending on which state you live in. In Illinois, the 529 plan is known as Bright Start. For more information about opening this type of account and the benefits of having one, see Bright Start Savings.

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