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The Business Forum Journal


“How Am I Going to Afford My Child’s Education?”

As Mary Johnson listened to her husband Bart read about rising college costs, her mood shifted from contentment to anxiety about the future. “How are we going to afford to send Emily to school?” Bart wondered aloud.

Scary Numbers

True, when it comes to college planning and college cost projections, the numbers have become a bit scary.  In recent years, college costs have been rising faster than the inflation rate, at about 4% to 6% per year. At that rate, a four-year degree for today’s newborn could top $100,000 at a public college  —  and more than $250,000 at a private college.

“We have to start an investment plan now,” said Mary.  With 11 years until Emily enters college, the family has time to develop a solid investment plan.

Investing for the Future

They will begin by investing $100 a month in an aggressive investment mix, made up mostly of stock investments.  When Emily is about 12, they’ll cut down their stock investments and move a majority of their money into more conservative bond and money market accounts. When Emily turns 15, they will shift everything into bond and money market products to try to protect what they have saved while earning a moderate return.

However, that probably will not be enough to meet their needs. So Bart and Mary will investigate other options as well.

Help Is Available

They could be in for a pleasant surprise. In addition to the traditional financial aid resources, the following options are now available —

  • The Coverdell Education Savings Account (formerly known as the Education IRA), which allows qualified families to invest up to $2,000 per year, per child under age 18. Earnings accumulate tax free as long as the money is used for qualified education expenses.

  • The HOPE Credit, which allows qualified individuals to take a tax credit of up to $1,500 for education-related expenses during the first two years of postsecondary education.

  • The Lifetime Learning Credit, which allows qualified individuals to take a tax credit of up to $2,000 in education expenses.
    (Note: Both the HOPE and Lifetime Learning Credit cannot be taken in the same tax year. Neither credit can be used in years when money is withdrawn from a Coverdell Education Savings Account.)

Also, Emily can take student loans, the interest on which is now tax deductible.

For More Help

If, like Bart and Mary, you find yourself wondering how you will afford your children’s education, start by investigating your options.

For more information, consult the following organizations:

Brian M. Clay is a Fellow of The Business Forum Institute and the President of Clay, Malek & Northam Wealth Management in Southern California; whose clients include both companies and individuals.  He has been recognized for numerous honors and accomplishments including being named to the Consumer Research Council of America's "Best Financial Planner" list.  Brian's professional registrations include the Series 6, 7, 24, 63, 66 held with LPL Financial, and CA Life & Health Insurance.  He also holds the Chartered Mutual Fund Counselor (CMFC) and CERTIFIED FINANCIAL PLANNER™ (CFP®) designations. The CFP® designation is considered by most to be the highest certification in the industry.  To be recognized as a CERTIFIED FINANCIAL PLANNER™, individuals must meet rigorous experience and ethical requirements, complete financial planning coursework, and pass a certification examination covering the financial planning process, risk management, investments, tax planning and management, retirement and employee benefits, and estate planning.  They must also meet ongoing continuing education requirements and uphold the CFP® Board Code of Ethics and Professional Responsibility.  Brian is an LPL Registered Principal.  Securities and Financial Planning Services offered through LPL Financial, A Registered Investment Advisor – Member FINRA/SIPC.  For a list of states in which he is licensed to do business, please visit  Brian holds a Bachelors degree in Economics from the University of California, Los Angeles (UCLA).

 Visit Brian's Web Site  ~

Contact Brian at:  ~  Click Here

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