Financial Literacy Never Stops!

Contributed by: Sandra Adams, CFP®

April is Financial Literacy Month. When many of us think about financial literacy, our thoughts immediately go to our children and educating them on the basics of money – debt, credit, budgeting, and the like. But the reality is that financial literacy is a lifelong process and applies to all of us at all ages and stages of life – the learning never stops. From a child's earliest spending to a senior citizen's retirement decisions, individuals apply their knowledge and skills to financial choices, and it is important that they are making informed decisions at all stages.

What we know:

• People who are financially literate are generally less vulnerable to financial fraud.

• Research shows that financial illiteracy is very common, with the Financial Industry Regulatory Authority (FINRA) attributing it to 66% of Americans.

• In its Economic Well-Being of U.S. Households in 2020 report, the U.S. Federal Reserve System Board of Governors found that many Americans are unprepared for retirement. More than one-fourth indicated that they have no retirement savings, and fewer than four in 10 of those not yet retired felt that their retirement savings are on track.

• Low financial literacy has left millennials—the largest share of the American workforce—unprepared for a severe financial crisis, according to research by the TIAA Institute. Over half lack an emergency fund to cover three months' expenses, and 37% are financially fragile (defined as unable or unlikely to come up with $2,000 within a month in the event of an emergency).

A strong foundation of financial literacy can help support various life goals, such as saving for education or retirement, using debt responsibly, and running a business. Key aspects of financial literacy include knowing how to create a budget, plan for retirement, manage debt, and track personal spending. The earlier one can begin to learn the basics, the better. However, there is always time to learn and apply lessons learned when it comes to handling one's own finances. 

Benefits of Financial Literacy:

Holistically, the benefit of financial literacy is to empower individuals to make smarter decisions. More specifically, financial literacy is important for several reasons.

• Financial literacy can prevent devastating mistakes: Seemingly innocent financial decisions may have long-term implications that cost individuals money or impact life plans. Financial literacy helps individuals avoid making mistakes with their personal finances.

• Financial literacy prepares people for emergencies: Financial literacy topics such as saving or emergency preparedness prepare individuals for the uncertain. Though losing a job or having a significant unexpected expense are always financially impactful, an individual can cushion the blow by implementing their financial literacy in advance by being ready for emergencies.

• Financial literacy can help individuals reach their goals: By better understanding how to budget and save money, individuals can create plans that set expectations, hold them accountable to their finances, and set a course for achieving seemingly unachievable goals. Though someone may not be able to afford a particular goal today, they can always make a plan to better increase their odds of making it happen.

• Financial literacy invokes confidence: Imagine making a life-changing decision without all the information you need to make the best decision. By being armed with the appropriate knowledge about finances, individuals can approach major life choices with greater confidence realizing that they are less likely to be surprised or negatively impacted by unforeseen outcomes.

If you are like we are at The Center and are interested in helping spread the word about Financial Literacy, organizations like Junior Achievement, The JumpStart Coalition, and The Consumer Financial Protection Bureau are great places to go to start.  

Sandra Adams, CFP®, is a Partner and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® and holds a CeFT™ designation. She specializes in Elder Care Financial Planning and serves as a trusted source for national publications, including The Wall Street Journal, Research Magazine, and Journal of Financial Planning.

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of the Sandra D. Adams, CFP® and not necessarily those of Raymond James. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional. Examples used are for illustrative purposes only.

Securities offered through Raymond James Financial Services, Inc. Member FINRA/SIPC. Investment advisory services offered through Center for Financial Planning, Inc.® Center for Financial Planning, Inc.® is not a registered broker/dealer and is independent of Raymond James Financial Services.

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete the CFP Board’s initial and ongoing certification requirements.

Big Changes Coming to the FAFSA Process

Contributed by: Josh Bitel, CFP®

2021 has brought some significant changes to the Free Application for Federal Student Aid (FAFSA) process. Thanks to the Consolidated Appropriations Act of 2021, one of these major changes, which will be in effect for the 2023‐2024 academic year, will allow grandparents to help pay for college expenses without falling into a financial‐aid trap.

Before this Act, if grandparents owned 529 Account to help out with college costs, these funds would be considered income to the student in regards to the FAFSA process. The more income a student shows, the less aid this federal program is willing to offer that student. For this reason, grandparent‐owned accounts have been deemed “financial‐aid traps” by many industry professionals.

However, the new FAFSA questionnaire, which will come into play for the 2023‐2024 academic year, no longer asks students to disclose cash support on the form. The IRS now uses a data retrieval tool for this purpose, therefore all student income will be taken from tax return data. This opens up a significant opportunity for grandparents to help cover some educational expenses for their grandchildren without impacting their financial aid status.

529 accounts remain the most popular and tax‐efficient way to help pay for education expenses. Any contributions to these accounts are removed from the contributor’s taxable estate, the funds within the account are invested and grow tax‐free, and (if used for educational expenses) withdrawals are taken out free of tax too! Grandparents have always been able to establish and contribute to these plans, however up until now, there were major pitfalls to be aware of. With the Consolidated Appropriations Act now in full swing, grandparents should strongly consider 529 accounts as a tool to help with education costs.

Josh Bitel, CFP® is a CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® He conducts financial planning analysis for clients and has a special interest in retirement income analysis.

Disclosure: As with other investments, there are generally fees and expenses associated with participation in a 529 plan. There is also a risk that these plans may lose money or not perform well enough to cover education costs as anticipated. Most states offer their own 529 programs, which may provide advantages and benefits exclusively for their residents. The tax implications can vary significantly from state to state. favorable state tax treatment for investing in Section 529 college savings plans may be limited to investments made in plans offered by your home state. Investors should consult a tax advisor about any state tax consequences of an investment in a 529 plan.

Under the Hood: Investment Allocation for 529 Savings Plans

Contributed by: Matthew E. Chope, CFP®

As many parents and grandparents know, 529 plans can be a wonderful strategy for families to help build college tuition savings for their children.  Not only do the plans benefit students, but they also carry advantages for the account creators or donors. The student can potentially enjoy tax-deferred growth with federally tax-free distributions if used for qualified educational expenses. Advantages to the donor include complete control of the account, high contribution limits, and no age restrictions or income limitations to inhibit investing.  It’s no surprise that 529 savings plans have become popular savings vehicles.

Have you ever wondered how 529 college savings plans are invested to meet time-sensitive tuition expenses? 

Age-based investment funds make this challenge easily manageable.  The graph below shows the glide path of equity allocations for 529 savings plans at various ages of the beneficiary from 2010 to 2013.

• Generally, 80% of the portfolio is invested in equities at age 0 and reduces to 10% by the time the beneficiary is enrolled in college.

• Since 2010, plan investment managers have become more conservative in the beginning (age 0) and end (age 19) stages of plans.

• Investment managers have become 6-7% more equity aggressive during ages 5-15 to meet tuition goals.

To meet tuition needs within 18 years, the graph reveals that investment managers are becoming more aggressive during the middle of a student’s investment time horizon, but they are also growing more cautious about preserving money closer to the end of the student’s investment time frame.  Interestingly, the graph also reveals that investment managers still rely on bonds as one of the safest places to preserve money (90% of the portfolio by age 19), despite the negative reputation bonds have received in our current rising rate environment. 

The glide path is designed to allow for an outcome with minimal surprises to all investors, no matter the economic environment when it’s time for college.  Some cycles will end on a poor note with markets crashing, while in other times markets will be soaring as students begin to tap the funds.  Ultimately, the guide path is designed to gradually reduce investors’ risk and exposure to market disruptions in the final years of saving, when investors are closest to needing the money they’ve worked so hard to save.  

Investors should carefully consider the investment objectives, risks, charges and expenses associated with 529 plans before investing. This and other information about 529 plans is available in the issuer's official statement and should be read carefully before investing. Investors should consult a tax advisor about any state tax consequences of an investment in a 529 plan.

As with other investments, there are generally fees and expenses associated with participation in a 529 plan. There is also a risk that these plans may lose money or not perform well enough to cover college costs as anticipated. Most states offer their own 529 programs, which may provide advantages and benefits exclusively for their residents. The tax implications can vary significantly from state to state.

Matthew E. Chope, CFP ® is a Partner and Financial Planner at Center for Financial Planning, Inc.® Matt has been quoted in various investment professional newspapers and magazines. He is active in the community and his profession and helps local corporations and nonprofits in the areas of strategic planning and money and business management decisions.

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The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of the author and are not necessarily those of Raymond James.

Fun Money Lessons over Summer Vacation

Contributed by: Robert Ingram

Now that summer is officially here and the kids are out of school, a lot of our attention may be on cookouts, camping, days at the beach, or fun on the water.  Yet, summer vacation can also provide great opportunities for teaching children and grandchildren lessons about money and good financial habits that can grow with them.  

Here are some ideas to get the kids learning about money while enjoying the summer fun:

Make It a Game

Playing games is certainly a fun way for kids (and many adults) to entertain themselves during the summer months. It can also help develop counting and math skills and introduces many money management concepts around earning, spending and saving.  There are so many kinds of games in all different formats.

• Technology is a big part of our daily lives. Children are growing up immersed in the world of smartphones, tablets and computers. The good news is that kids allotted time on those can be spent doing online games focused on building money skills. For example, the website practicalmoneyskills.com offers games for different age groups:

  • Peter Pig’s Money Counter for younger elementary school children

  • Sports-themed Financial Football and Financial Soccer for ages 11 and above

• In the wide universe of smartphone apps, there are thousands of games available. By searching your app store under educational categories, financial, or money games, you can find some hidden gems. A couple of examples recognized by Parents Choice Awards and financial literacy organizations include:

  • Marble Math and Savings Spree for elementary school age children

  • Farm Blitz for pre-teens to young adults

• Although these might seem “low tech,” you can’t forget about the old-fashioned family board games. These include classics like Monopoly, Monopoly Jr, Pay Day, and the Game of Life, or other unique games like Allowance or Acquire. Board games introduce kids of all ages to different financial choices from managing income and spending to making investment decisions. And who doesn’t love a good family game night once in a while?!

Getting the Kids Involved in Decision-Making

• The piggy bank has always been a great way to introduce younger children to the lesson of saving and seeing how small regular contributions can really add up. Finding one that lets kids see what’s inside, helps them understand their progress along the way and keeps them interested. To delve even further, some piggy banks have different slots where kids are able to save their pennies for different purposes. The Money Savvy Pig, for example, has four sections that allow kids to set aside amounts for saving, spending, donating, and investing.

• Family vacation or outings this summer? Get the kids involved in the planning. What activities might you do? What treats or souvenirs could they want? Set some budget guidelines for these categories and have them help you prioritize and decide how you’ll spend the money. Do the kids want to expand the budget? This can be an opportunity for them to set goals of saving some of their allowance, summer job income, or even spare change to use toward those extra budget items.

• Back-to-school shopping can be another great learning opportunity, especially for pre-teens and the teenagers. Rather than scrambling in late August only to see the stack of credit card bills in September, help the kids put together a shopping plan they can own. Work with them on setting up a reasonable budget and making their lists. They can start prioritizing their “needs” vs. “wants” and then figuring out how they can best use their budget. This also gives kids the chance to learn to compare brands, research the best deals, and even find special discounts.

Ideas for the Summer Reading List

For kids that plan to spend some time on their summer break kicking back with a good book, they can add a few titles to their reading list.  There are a ton of great books out there on the subject of money and personal finance. 

A few come to mind that are relatively easy reads and have valuable insights for students and adults alike: 

• “Learn to Earn” by famed mutual fund manager Peter Lynch is aimed particularly at young adults, providing concepts in the basics of investing, the stock market, and business in general. One of Peter Lynch’s investing principles over the years has been “buy what you know,” meaning that many investment ideas can begin with products, services, and brands you know and use. Kids may be able to apply this to things in their own everyday life today such as:

  • What is the latest game they enjoy or what app are they and all of their friends using?

  • They can begin to learn about the companies behind them.

• Two other titles, “The Wealthy Barber” by David Chilton and “The Millionaire Next Door” by Thomas Stanley and William Danko, have also been around for over 20 years now and are still just as relevant today. Both of these books have several lessons about developing simple habits in spending, saving, managing debt and investing. Common themes in each book are:

  • Achieving financial confidence and independence is a process done over time.

  • The concept of wealthy may not fit the image we often have in our head.

Robert Ingram is a Financial Planner at Center for Financial Planning, Inc.®

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Views expressed are not necessarily those of Raymond James Financial Services and are subject to change without notice. Information contained herein was received from sources believed to be reliable, but accuracy is not guaranteed. Information provided is general in nature. The website link included and apps mentioned are provided for information purposes only.  Raymond James is not affiliated with and does not endorse, authorize or sponsor any third-party web site, app or their respective sponsors.  Raymond James is not responsible for the content of any web site, app, or the collection or use of information regarding any web site's users and/or members. Raymond James Financial Services, Inc. is not affiliated with the above independent organizations.

Funding the Future - A Rockin’ Good Time

Contributed by: Clare Lilek

On April 18th, The Center proudly sponsored the band Gooding, through the non-profit Funding for the Future, to play at Hazel Park High School. The event was a little over an hour and involved fun rock music, excited high schoolers, and important lessons in financial literacy.

Funding for the Future is a nonprofit that coordinates bringing the band Gooding to different high schools, student groups, and kid oriented organizations to not only provide a free concert, but also give a crucial and entertaining lesson in financial literacy. All too often, some of our children reach adulthood without ever hearing about the impact of weekly savings, the perils of credit cards and credit scores. “Put your money away and let it work for you,” was a common sentiment that was said throughout the event, encouraging students to save money each week in an account like a Roth IRA, in order to let that money grow over time—a practice we heartily support at The Center!

The band Gooding is passionate about financial literacy and sharing that message with music. Their songs aren’t about stocks and bonds, however; they play exciting and down to earth rock music which endears them to the kids, allowing their message after the songs are over to sink in with more credibility. The band is inspired to bring financial literacy to students all over the country because of their own lack of education when it came to handling money as they grew up. We see examples of celebrities and pro-athletes that go broke shortly after making it big. The band explained that mindset comes from growing up and thinking one check, one lottery ticket, one record deal is going to change it all; but he encourages the kids to realize that change is within them and doesn’t come from the outside.

Gooding also talked about the perils of opening up too many credit cards, of not knowing your credit score and what affects it. He stresses, though, that money isn’t bad, it’s our lack of knowledge around money that can mess us up financially. That’s why he encourages good financial behavior, like putting $50 a week in a Roth IRA once you start working. You start young and have that money grow for you exponentially over time. He showed the students real examples and charts in order to encourage the students to take the idea of retirement savings seriously. He also talked about creating SMART goals; having Specific, Measurable, Attainable, Realistic, and Time oriented goals in order to plan and budget successfully. It was a lesson mixed with long term planning and tangible strategies the students could implement right away.

After thirty minutes of fun rock music and a thirty minute crash course in basic financial literacy, the students left smiling and so did we! It’s a part of The Center’s mission to spread financial literacy to the community around us, and sponsoring Funding for the Future and the band Gooding was just one way in which we do so. We look forward to many future partnerships in order to spread the word!

Clare Lilek is a Challenge Detroit Fellow / Client Service Associate at Center for Financial Planning, Inc.®

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Any opinions are those of Clare Lilek and not necessarily those of Raymond James.

A Change to Your American Funds CollegeAmerica 529 Plan

Contributed by: Melissa Parkins, CFP®

If you have 529 Plan(s) with American Funds CollegeAmerica, a change is coming this year that you should be aware of.

What is happening?

On June 24, 2016 your CollegeAmerica 529 account will be transferred out of the custody of American Funds, and into the custody of Raymond James.

What does this mean?

• Better communication, efficiency, and service for you! Raymond James will now hold your CollegeAmerica 529 account assets instead of American Funds.
• Communications about your account will now be more consistent and clear. Statements and tax documents will all come from Raymond James, instead of multiple communications from multiple sources.
• If your 529 account is currently enrolled in systematic purchase plans at American Funds, they will continue without any disruptions or delay. The information will be transferred to Raymond James to continue any automatic transactions that are currently set up.
• Your Raymond James account number for your 529 account will not change. The CollegeAmerica Program will continue to govern your account, but Raymond James will now hold the account.
• The change will not affect the value of your investments, and there will not be any fees for this transfer.

What other information will you be receiving?

• You will receive a letter from Raymond James at the beginning of April with the details of this change. If you have more than one CollegeAmerica 529. You will receive multiple mailings, one for each account.
  • This letter will state that your financial advisor (us) will now be your single point of contact for managing your American Funds CollegeAmerica 529 account. We have always been your main point of contact for these accounts. So you will continue to call or email us with any requests related to your accounts.
• You will receive a statement from American Funds after June 24 reflecting a zero balance, because your investments in the 529 account will no longer be held by American Funds. The statement will show a transfer out of the 529 plan.
• Two year-end statements will be sent for your 529 plan in early 2017: one from American Funds and one from Raymond James. Your year-end statement from American Funds will indicate that the funds transferred out.
• If you had any reportable transactions before June 24, you will receive a 1099-Q tax document from American Funds. If you had any reportable transactions after June 24, you will receive a 1099-Q tax document from Raymond James. These would also both come in early 2017.

In a nutshell, not much is changing from your end. This change will allow us to more timely and efficiently service your 529 accounts, since we will no longer need to go through American Funds for any processing. This means better service to you! Please call us if you have any questions.

Melissa Parkins, CFP® is an Associate Financial Planner at Center for Financial Planning, Inc.

Technology Supports an Aging Population

Contributed by: Sandra Adams, CFP®

I was recently given the opportunity to visit one of the nation’s top research university’s that has a research institute dedicated to  aging – quite a treat for a geek like me interested in the study of gerontology!  The trip attracted my attention to current studies that focus on topics such as how technology can impact the lives of older adults, and how different generations interpret and understand financial concepts and financial advice – both interesting concepts to our work with clients here at the The Center.

My favorite take-a-way from my trip was a new awareness of the new technology service resources that are now available. So many of my conversations with clients center around the independence and the desire to remain in their family owned homes for as long as possible.  What I learned on my recent trip was how new technology and sharing economic services can make it possible for older adults to fulfill their wants and needs, and potentially make it possible for them to remain active and independent for far longer than they ever thought possible. 

How can you or an older adult in your life make this work in your favor?

• Start by becoming aware of new technology and the sharing service economy.  What am I talking about here?  Services like Uber for transportation, Pillboxie for medication reminders, Heartwise and Care Beacon for health monitoring and assistance, Washio for laundry services, Blue Apron for easy meal preparation, Task Rabbit for locating help with tasks around the house, and so many more.

• Begin to think about your long life planning and what options and preferences you have in mind for your housing, care, etc.

• Work with your financial planner and other professionals to put real plans in place to make sure your preferences can come true, and to make sure that you have access to all of the best and, if it makes sense, most technologically advanced, resources available to assist you.

Technology isn’t just for your kids and grandkids!  The tools and services now available can be used to make the aging process a more convenient, active and independent one for the ages – if we allow ourselves to explore it!

Sandra Adams, CFP® is a Partner and Financial Planner at Center for Financial Planning, Inc. Sandy specializes in Elder Care Financial Planning and is a frequent speaker on related topics. In addition to her frequent contributions to Money Centered, she is regularly quoted in national media publications such as The Wall Street Journal, Research Magazine and Journal of Financial Planning.

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The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Sandy Adams and not necessarily those of Raymond James. Raymond James is not affiliated with and does not endorse the services of the above mentioned companies in this material.

The Ladder to Adulthood—What Millennials Need to Know

Contributed by: Clare Lilek

I graduated from college in 2014, and this year started the first salaried job of my professional career. These are big steps in what I call my “ladder to adulthood.” What is this ladder, you may ask? Well twenty-somethings (and thirty-somethings too) each have their own ladder to adulthood: the stepping blocks we accomplish little by little to become full adults. These steps can include becoming participating civil citizens, being financially independent, and having a sense of life and economic stability. Yeah, it’s a pretty important ladder.

When you turn eighteen, your ladder begins as you choose your next steps after graduating high school. Depending on how knowledgeable you are about the adult decisions that lie ahead and how ready you are to make said decisions, you could have a step ladder, or something reminiscent of a skyscraper.

Personally, I didn’t realize exactly how long my own ladder to adulthood was until I arrived at The Center. This is my first time working in the financial industry and my previous exposure to these topics were hushed whispers of the mysterious 401ks and the disappearance of pensions—what did that even mean?! After working here for a couple of months, not only did I figure out what a 401k is, but in general, my knowledge about financial topics has grown exponentially. But that got me thinking, if I didn’t work at The Center, when would I have learned all this? Would it have been too late? Well, not to worry, I have compiled a very basic list of what millennials entering the workforce fulltime should be (but aren’t necessarily) doing:

1. Think about your future. 401ks and IRAs are fancy terms for savings – savings that are dedicated to your retirement. The earlier you open one of these accounts, the more money you can accumulate and the more stable you’ll be when your retirement comes.

2. Understand the importance of the market. Investments are the way of the world and just saving money in a bank account is not going to accrue as much interest as investing does. 401ks and IRAs take your savings and invests it in the market which, in theory, will allow you to have more money than just by keeping your money in the bank.

3. Know the lingo. Stocks vs bonds, and the pros and cons of each. Understand diversified portfolios and what that means for stability.

4. Save, save, and save some more! Have a budget that includes savings, and stick to it. Don’t live beyond your means, an important life lesson! And when budgeting, save a portion of each monthly salary.

5. Have a plan. If investments and 401ks are mysteries to you, there is no shame in having a Certified Financial Planner™ help create a plan with you—actually, it’s a very “adult” thing to do. They can set up accounts, plan for your future, and make sure you’re in the know.

Hey Millennial, if you were to win the lottery today, would your first thought be, “I should probably invest that money and save for my future?” What about your second or third thought? I’m going to take a guess that, no, that’s probably not in your initial thought process. But shouldn’t it be? That’s my point. We’re not talking about these topics and no one is talking to us about them, yet they are crucial in securing our future.

We learn as preschoolers that the early bird gets the worm, and in this case, the early bird gets a more comfortable retirement and financial life. Just by learning about financial planning, investments and the like, you are stepping up that ladder to adulthood and ensuring that when you step off that ladder, you’re stepping onto a stable platform.

Clare Lilek is a Challenge Detroit Fellow / Client Service Associate at Center for Financial Planning, Inc.

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Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Any opinions are those of Clare Lilek and not necessarily those of Raymond James. 401(k) plans are long-term retirement savings vehicles. Withdrawal of pre-tax contributions and/or earnings will be subject to ordinary income tax and, if taken prior to age 59 1/2, may be subject to a 10% federal tax penalty. Prior to making an investment decision, please consult with your financial advisor about your individual situation.

Financial Aid Expert Gives Her Best College Savings Advice

Contributed by: Nick Defenthaler, CFP®

The Michigan Education Trust (MET) pre-paid tuition and Michigan Education Savings Plan (MESP) 529 plan are both great ways to save for college. (If you’re just learning about 529 plans, check out this blog on 529 basics and this blog on using 529s as tax credit strategies.) One question we often hear from parents and grandparents, however, is how these education accounts can affect a child’s financial aid eligibility.  As I’m sure many of you are aware, financial aid, FAFSA, student loans, etc. can be pretty darn confusing.  For that reason, our firm has partnered with Carrie Gilchrist of Oakland University to help us navigate these types of questions from the perspective of an expert in the financial aid arena.  Carrie is OU’s Senior Financial Aid Outreach Advisor and has helped thousands of parents and students with financial aid, including scholarships, grants, and student loans.  She’s going to be sharing her expertise to help our clients and others with college planning.  That’s why I asked Carrie to give her take on what to keep in mind when utilizing the MET (pre-paid tuition) or MESP (529 plan) when saving for college. Here’s what she had to say:

Oakland University’s Carrie Gilchrist:

Saving for college is always a good idea, and regardless of how much has been saved, college students should ALWAYS file the Free Application for Federal Student Aid (FAFSA).  Every school has a threshold at which students are eligible for need-based aid, so even if a student is ineligible for Federal need-based aid, the student could still be eligible for need-based aid from other sources by filing the FAFSA.  The FAFSA can be filed online at www.fafsa.gov, every year, as soon after January 1 as possible, starting in the student’s senior year of high school.  When filing the FAFSA, it may be necessary for students and parents to provide asset information, although not everyone is required to do so.  If the student and/or parent is required to report asset information, one of the asset questions will require information about investments.

If the student completing the FAFSA is considered “independent” by the Department of Education, he or she does not need to report parent information on the FAFSA.  In that case, educational savings plans owned by the student (and/or the student’s spouse) are reported on the FAFSA in response to the investment question of the assets section. 

If a student is considered “dependent” by the Department of Education and must include parent information on the FAFSA, the educational savings plan owned by the parents or by the student, will be included in the parents’ response to the investment question of the assets section. 

In both cases, the entirety of the information provided on the FAFSA is used to calculate the Estimated Family Contribution (EFC), which represents how much the Department of Education estimates the student and/or their family can contribute to the student’s educational expenses.  The EFC is used by the college or university to determine the type of financial aid the student is eligible to receive.

A major benefit of a college savings plan is it does NOT count against the student in their financial aid award package (different than FASFA).  The financial aid award package will list the maximum amount of scholarships, grants, work-study, and loans the student is eligible to receive, but a college savings plan is never considered a financial aid award in their award package, regardless of having to report it on the FAFSA. 

As you can see, applying for federal aid, scholarships, student loans, etc. can make your head spin.  It is certainly a confusing topic you want to take very seriously and get advice from an expert, like Carrie, if you’re unsure of anything or have questions.  Although a college savings plan can impact certain aspects of your student loans, it certainly does not discount the importance and monumental positive impact it can have on a child’s education plan.  If you’d like to learn more about college savings please don’t hesitate to contact us.  Keep your eyes and ears open for upcoming blogs, webinars and in-person seminars we will be hosting with Carrie so she can continue to share her expertise on this extremely important topic!

Nick Defenthaler, CFP® is a CERTIFIED FINANCIAL PLANNER™ at Center for Financial Planning, Inc. Nick is a member of The Center’s financial planning department and also works closely with Center clients. In addition, Nick is a frequent contributor to the firm’s blogs.

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This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Nick Defenthaler, CFP® and Carrie Gilchrist and not necessarily those of Raymond James. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Raymond James is not affiliated with and does not endorse the opinions or services of Carrie Gilchrist or Oakland University. As with other investments, there are generally fees and expenses associated with participation in a 529 plan. There is also a risk that these plans may lose money or not perform well enough to cover college costs as anticipated. Most states offer their own 529 programs, which may provide advantages and benefits exclusively for their residents. The tax implications can vary significantly from state to state. You should discuss any tax or legal matters with the appropriate professional.

Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website's users and/or members.

Center Team Members Participate in Money Smart Week

Contributed by: Center for Financial Planning, Inc.

April is Financial Literacy Month and when it comes to financial literacy, knowing how to manage your money is a big part. That’s why the “Money Smart Week” public awareness campaign was created by the Federal Reserve Bank of Chicago in 2002. This year it falls on April 18 – 25th. The goal is to help consumers better manage their personal finances. This is achieved through the collaboration and coordinated effort of hundreds of organizations across the country, including local organizations like our Financial Planning Association of Michigan. Other involved include local libraries and corporations that are dedicated to promoting financial literacy (like the Center for Financial Planning!).

Programming is offered to all demographics and income levels and covers all facets of personal finance. Melissa Joy, CFP® and Sandy Adams, CFP® are again volunteering at their local libraries where they will be offering presentations to the public on financial planning topics. To find an event to attend in your neighborhood, click here: Money Smart Week®.

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