Education Archives - Hanover Mortgages

August 24, 2021

Mint Money Audit: 34 and Living Paycheck to Paycheck

Each month I’ll be helping a Mint user analyze their financials in an effort to offer some strategies and ideas for saving better, squashing debt and in, some cases, earning more. [If you’d like to be considered, just email me [email protected]]

This week we begin with Rebecca [name has been changed to assure privacy] from St. Louis, MO, one of Mint’s original “beta” users since 2006. The 34 year-old government worker says she loves the money tool because it helps keeps her organized and on track.

Still, she’s struggling to boost savings, repay debt and raise her income. She’s living paycheck-to-paycheck and wants to get ahead. [As a homeowner, she’d also like to tackle a few home renovation projects.]

A little more about Rebecca and her Mint profile:

Annual salary: $65,000 (before taxes, health insurance & retirement contributions)
Monthly Expenses: $2,200 a month.
Biggest Monthly Expense Categories:
- Mortgage $986
- Food, Gas, Laundry, Entertainment, Misc.: $760
- Condo Fees: $307
- Student Loans: $22,900 (monthly payment is $285)
- Credit Card Debt: $10,900 (monthly minimum payments total $200)

In our conversation I had the chance to learn a little more about Rebecca’s financial profile and the moves she’s willing to make to create some much-needed breathing room in her budget.

Here are a few of my recommendations:

Cut the Cord on Cable

Of all her expense, Rebecca and I discussed that cable is the least desirable and least needed. [I cut the cord back in August and use mainly Netflix and my Apple TV to access my favorite shows] Her cable bill amounts to $60 a month. Slash it and she can save $720 a year.

Save on the Go

Rebecca is conscious about saving. She uses Digit, a new mobile app that saves nominal amounts for you every few days or once a week. It bases its savings decisions on your flow of income and expenses. Since last fall, Rebecca has saved over $400 using Digit. I recommended she stick with it, since it’s totally painless and can serve as a nice “slush” fund for her when she wants to splurge on herself once in a while.

Take on a Side Gig

Because has a government position, Rebecca’s pay is very structured and it’s not likely she can receive a raise just for asking. She does anticipate a 1.6% raise this year, but I thought that wasn’t really enough to move the needle as far as saving more and squashing debt. (I mean, that’s only a tad better than the year-over-year rise in inflation!) My recommendation: Start looking at private sector jobs. Rebecca has a Master’s degree and could make probably twice what she’s earning now working for a company – or for herself! It’s something she’s considered and will be more proactive about it in 2017.

Meanwhile, how about a side gig? Rebecca works from home some days and has a nice two-bedroom house. While she wasn’t keen on my idea of renting her second bedroom out once in a while via sites like AirBnB, she did think she could have fun dog-sitting once or twice a week. We decided this might be an easy way to not only earn extra income. It can also, depending on the dog, serve as a nice stress relief!

At Rover.com and DogVacay.com, for example, sitters and dog walkers that take on gigs on a regular basis can earn $1,000 or more per month. Per night, pay can range and vary slightly depending on the neighborhood, but you can earn between $25 and $35 per night.

If Rebecca dog-sits twice a week, she could earn an extra $200 to $300 a month. In a year, she’ll have up to $3,600 in her pocket.

Maximize Your Tax Refund

Rebecca says her tax refund – combining Federal, State and Local tax refunds – will be around $4,000. My suggestion was to place most of that or $3,000 towards her credit card debt and save $1,000 in her bank account.

A tax refund can be a huge help in getting you to your financial goals faster. If you have credit card debt, it’s wise to first use the refund to pay that down. And if you lack emergency savings, use some of the IRS windfall to bolster your rainy day account.

Transfer Debt to a 0% Balance Transfer Card

Rebecca pays a little more than the minimum on each of her two credit cards. Together, her cards average an interest rate of about 10%. On a nearly $11,000 balance, she’ll be paying down this debt for the next 6 years.

But if she commits to all of the above and applies to her card debt:

Existing $200 she is already contributing to
Savings from cable ($60)
Earnings from dog sitting ($300)
A majority or $3,000 of her tax refund

AND transfers her credit card debt to a 0% balance transfer card then she could be out of debt in about 15 months or so, by the time some balance transfer cards end their 0% introductory rate. [Her credit score is well in the 800s so she shouldn’t have a hard time qualifying for a great card.[

Audit Conclusion: By transferring her credit card debt to a 0% balance transfer card, cutting cable and taking on a small side gig, Rebecca will be able to be credit card debt free in a little over a year – as opposed to six! After that, my recommendation is to PRETEND the debt still exists and allocate a minimum of $500 a month towards emergency savings. This time next year, I hope she’ll also have found a new job that pays her more for her skills and education. A greater income will mean she can finally work on some of her pet projects around the house!

Have a question for Farnoosh? You can submit your questions via Twitter @Farnoosh, Facebook or email at [email protected].

Farnoosh Torabi is America’s leading personal finance authority hooked on helping Americans live their richest, happiest lives. From her early days reporting for Money Magazine to now hosting a primetime series on CNBC and writing monthly for O, The Oprah Magazine, she’s become our favorite go-to money expert and friend.

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Source: mint.intuit.com

May 11, 2021

Investing in a College Town Rental Market: Ann Arbor, Michigan

College towns are attractive markets for investors in rental properties for several reasons. Students and faculty create large and dependable markets of tenants. Local economies dominated by academic institutions are remarkably stable compared to those based on manufacturing or agriculture. Larger universities create hundreds of non-academic jobs in research centers, medical facilities, and new companies spun off by technologies developed locally.

Ann Arbor, Michigan, home to the main campus of the University of Michigan, is an excellent example of a campus-based economy that is much larger than its facility and student body. One out of three local jobs are in educational service, and an additional one out of ten are in technical, professional and scientific services. At $39,235, Ann Arbor’s average per capita income and its median family income of $102,615 are 20% to 30% higher than national averages.

WalletHub ranked Ann Arbor, the nation’s fifth-best college town and the best small city college town in 2020 based on academic, social, and economic opportunities for students. It also ranked Ann Arbor, the nation’s “most educated city in 2020,” outranking San Jose, California, and Washington, D.C. It also placed first in educational attainment and quality of education and attainment gap.

Read: 5 Reasons Why You Should Still Buy an Investment Property

college university student leaving library

Affordability is Under Fire

Popularity can have a downside, and Ann Arbor is experiencing the price of success in rising housing costs and decreasing affordability, especially in Washtenaw County as a whole.

As of February 2020, the average monthly rent in Ann Arbor was $1,580 for an 882-square-foot apartment, a 3% increase over 2019, higher than the national median for a comparable apartment ($1,468) and considerably higher than nearby Detroit ($1,069) or East Lansing ($1,294), home of Michigan State University. Half of Ann Arbor tenants spend 30% or more of their household income on rent. HUD defines cost-burdened families as those “who pay more than 30% of their income for housing” and “may have difficulty affording necessities such as food, clothing, transportation, and medical care.”

“Ann Arbor – and its central driver, the University of Michigan – is a magnet for highly educated households with upward mobility and significant disposable income. With some exceptions, Ypsilanti (City and Township) and their challenge of being overloaded by a disproportionate number of at-risk households and homes with negative equity – is where the most affordable options exist,” stated a 2015 Washtenaw County housing study.

“Ann Arbor will become more costly, and less affordable, especially to non-student renters in the short run and eventually, to aspiring buyers as well. The driver for higher costs is a combination of high livability and quality of life, great public schools, resulting in sustained demand by households with discretionary income, and resulting expectations of stable and continually rising property values,” the study concluded.

Read: Investing in a College Town Rental Property: Charlottesville, VA

The Ann Arbor Rental Market is Vast and Profitable

In many ways, Ann Arbor is a great rental market. The massive student body drives demand. About 70% of the University of Michigan’s 46,000 students live off-campus and the current cap rate for Washtenaw County apartment buildings is a respectable 7.6%. (The capitalization rate is the ratio of rentals’ net operating income to property value. Low cap rates imply lower risk, and higher CAP rates indicate higher risk.)

Living off-campus is so popular; the university maintains web pages listing rentals and providing advice and information for off-campus renters. This summer initiated a “virtual housing fair” to help students find rentals for the 2020-2021 school year.

group of young college students hanging out at home

Homes.com lists 1,235 properties in Ann Arbor, with a median home value of $355,600, about 17% above the national median of $304,100 in July. Of the total homes in Ann Arbor listed on Homes.com, 60% are for sale, and 34% are rentals.

Read: What to Know Before You Rent to College Students

Though several new high-rise apartment buildings recently opened and more are under construction, single-family rentals still dominate the market. Homes.com lists more than 200 single family homes for rent in Ann Arbor. Smaller rental households are a result of the above-average presence of single-family rentals relative to apartments. The average household size for Ann Arbor rentals is 2.2 people, compared to 2.3 for Michigan and 2.5 for the nation as a whole.

COVID-19 and Ann Arbor, Michigan

COVID-19 delayed the University of Michigan’s plans for the fall semester but did not cancel fall apartment rentals. The university’s plans include both in-person and remote classes, a new academic calendar, and the elimination of breaks and changes centered around preventing the spread of the coronavirus.

Despite the pandemic, Ann Arbor is still one of the best college town markets in the nation. As in most markets, acquisition is a challenge. Property prices in Ann Arbor are rising, and the smaller, less expensive homes that make ideal single-family rentals are few and far between. Otherwise, conditions are good for single-family rental owners and will improve as the nation returns to health.

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Steve Cook is the editor of the Down Payment Report and provides public relations consulting services to leading companies and non-profits in residential real estate and housing finance. He has been vice president of public affairs for the National Association of Realtors, senior vice president of Edelman Worldwide and press secretary to two members of Congress.

Source: homes.com

April 12, 2021

How to Pay Off $130,000 in Parent PLUS Loans for Just $33,000

Millennials are not the only ones saddled with the obligation to pay back massive amounts of student loans. Many parents take out loans in their names to help their children pay for college, and in many cases, these loans are getting in their way of achieving their goals, like retiring.

Under the federal student loan system, parents can take out Parent PLUS loans for their dependent undergraduate students. One of the major differences between Parent PLUS loans and the loans that the students take out is that there are fewer repayment options available for Parent PLUS borrowers. Parent PLUS loans are only eligible for the Standard Repayment Plan, the Graduated Repayment Plan and the Extended Repayment Plan.

There are other strategies for managing Parent PLUS debt, however. When consolidated into a Direct Consolidation Loan, Parent PLUS loans can become eligible for the Income-Contingent Repayment (ICR) Plan, in which borrowers pay 20% of their discretionary income for up to 25 years.

Currently, ICR is the only income-driven repayment plan that consolidated loans repaying Parent PLUS loans are eligible for. However, when a parent borrower consolidates two Direct Consolidation Loans together, the parent can potentially qualify for an even better repayment plan and further reduce their monthly payments.

Nate, the high school math teacher

Let’s take a look at Nate, age 55, as an example to see how a parent can manage Parent PLUS loans and still retire as hoped.

Nate is a public school teacher who makes $60,000 a year and just got remarried to Nancy, who is also a teacher. Nate took out $130,000 of Direct Parent PLUS loans with an average interest rate of 6% to help Jack and Jill, his two kids from a previous marriage, attend their dream colleges. Nate does not want Nancy to be responsible for these loans if anything happens to him, and he is also worried that he would not be able to retire in 10 years as he had planned!

If Nate tried to pay off his entire loan balance in 10 years under the federal standard repayment plan, his monthly payment would be $1,443. Even if he refinanced privately at today’s historically low rates, his payments would still be around $1,200, which is too much for Nate to handle every month. Also, since Nate’s federal loans are in his name only, they could be discharged if Nate dies or gets permanently disabled. Therefore, it is a good idea to keep these loans in the federal system so that Nancy would not be responsible for them.

In a case like this, when it is difficult for a federal borrower to afford monthly payments on a standard repayment plan, it’s a good idea to see if loan forgiveness using one of the Income-Driven Repayment plans is an option. In Nate’s case, his Parent PLUS loans can become eligible for the Income-Contingent Repayment (ICR) plan if he consolidates them into one or more Direct Consolidation Loans. If Nate enrolls in ICR, he would be required to pay 20% of his discretionary income, or $709 a month. Compared to the standard 10-year plan, Nate can cut his monthly burden in half by consolidating and enrolling in ICR!

But that’s not all …

Double Consolidation

For Nate, there is another strategy worth pursuing called a double consolidation. This strategy takes at least three consolidations over several months and works in the following way:

Let’s say that Nate has 16 federal loans (one for each semester of Jack and Jill’s respective colleges). If Nate consolidates eight of his loans, he ends up with a Direct Consolidation Loan #1. If he consolidates his eight remaining loans, he ends up with Direct Consolidation Loan #2. When he consolidates the Direct Consolidation Loans #1 and #2, he ends up with a single Direct Consolidation Loan #3.

Since Direct Consolidation Loan #3 repays Direct Consolidation Loans #1 and 2, it is no longer subject to the rule restricting consolidated loans repaying Parent PLUS loans to only be eligible for ICR. Direct Consolidation Loan #3 could be eligible for some other Income-Driven Repayment plans, including IBR, PAYE or REPAYE, in which Nate would pay 10% or 15% of his discretionary income, rather than 20%.

Reducing Nate’s monthly payments

For example, if Nate qualifies for PAYE and he and Nancy file their taxes using the Married Filing Separately (MFS) status, only Nate’s $60,000 income is used to calculate his monthly payment. His monthly payment now would be reduced to $282. If he had chosen REPAYE, he would have to include Nancy’s annual income of $60,000 for the monthly payment calculation after marriage — regardless of how they file their taxes — so his payment would have been $782.

Double consolidation can be quite an arduous process, but Nate decides to do it to reduce his monthly payment from $1,443 down to $282.

How Parent PLUS borrowers can qualify for forgiveness

Since Nate is a public school teacher, he would qualify for Public Service Loan Forgiveness (PSLF), and after making 120 qualifying payments, he would get his remaining loan balance forgiven tax-free.

Since Nate is pursuing forgiveness, there is one more important thing he can do to further reduce his monthly payments. Nate can contribute more to his employer’s retirement plan. If Nate contributed $500 a month into his 403(b) plan, the amount of taxable annual income used to calculate his monthly payment is reduced, which further reduces his monthly payments to $232.

Summarizing Nate’s options in dollars and cents

With the standard 10-year repayment plan, Nate would have to pay $1,443.26 every month for 10 years, for a total of $173,191.
With a consolidation, enrolling in ICR, filing taxes using the Married Filing Separately status and Public Service Loan Forgiveness, he would start with $709 monthly payments and pay a total of around $99,000 in 10 years.*
With double consolidation, enrolling in PAYE, filing taxes using the Married Filing Separately status and Public Service Loan Forgiveness, his monthly payment starts at $282, and his total for 10 years would be around $40,000.
For maximum savings: With double consolidation, enrolling in PAYE, filing taxes using the Married Filing Separately status, Public Service Loan Forgiveness and making $500 monthly contributions to his employer retirement account for 10 years, Nate’s monthly payment starts at $232, and his total payment would be around $32,500. He would have contributed $60,000 to his 403(b) account in 10 years, which could have grown to about $86,000 with a 7% annual return. Comparing this option with the first option, we can project that Nate pays about $140,000 less in total, plus he could potentially grow his retirement savings by about $86,000.

As you can see, there are options and strategies available for parent borrowers of federal student loans. Some of the concepts applied in these strategies may work for student loans held by the students themselves as well.

An important thing to remember if you are an older borrower of federal student loans is that paying back the entire loan balance might not be the only option you have. In particular, if you qualify for an Income-Driven Repayment plan and are close to retirement, you can kill two birds with one stone by contributing as much as you can to your retirement account. Also, since federal student loans are dischargeable at death, it can be a strategic move to minimize your payments as much as possible and get them discharged at your death.

Also, loan consolidation can be beneficial as it was in this example, but if you had made qualifying payments toward loan forgiveness prior to the consolidation, you would lose all of your progress you had made toward forgiveness!

As always, every situation is unique, so if you are not sure what to do with your student loans, contact a professional with expertise in student loans.

*Note: The projections in Options 2 through 4 assume that, among other factors such as Nate’s PSLF-qualifying employment status and family size staying the same, Nate’s income grows 3% annually, which increases his monthly payment amount each year. Individual circumstances can significantly change results.

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Associate Planner, Insight Financial Strategists

Saki Kurose is a Certified Student Loan Professional (CSLP®) and a candidate for the CFP® certification. As an associate planner at Insight Financial Strategists, she enjoys helping clients through their financial challenges. Saki is particularly passionate about working with clients with student loans to find the best repayment strategy that aligns with their goals.

Source: kiplinger.com

April 6, 2021

College Students: Here are The Biggest Financial Mistakes You Need to Avoid

Slipping up while in college is basically a rite of passage. I made so many mistakes at Indiana University – many of which I would never admit publicly – that reminiscing on my college years comes with a heavy dose of embarrassment.

Thankfully, most mistakes made while at university are temporary. They may have short-term consequences, but drinking tickets and dorm infractions don’t tend to follow you into adult life. Financial mistakes, on the other hand, can be a little stickier.

College may seem like a safe little bubble, but money is still money. The cash you blow on parties and takeout doesn’t magically get reimbursed once you earn a diploma. Beyond that, the bad habits you develop during these crucial years can haunt you for decades to come. Trust me – I’ve been there.

Here are some of the biggest mistakes I made in college, and how you can avoid them.

Not Keeping a Budget

My forays into budgeting as a college student usually fizzled out. Like a New Year’s resolution, I’d make a firm commitment and then give up after a few weeks.

When I was a second-semester senior, I decided to finally buckle down and stick to a budget. Graduation was fast approaching and I knew I hadn’t been handling my money responsibly. It was time to get serious about budgeting before I entered the real world.

At first it was really hard. I wasn’t used to depriving myself, and seeing how much I was wasting on eating out and buying new clothes was a hard pill to swallow. It wasn’t until I started my first real job after college that I finally got the hang of budgeting – but it took a lot of trial and error.

If you’re interested in starting a budget, set up a Mint account and try tracking your expenses for a few weeks. Knowing where your money is going could be enough to change your behavior and establish better spending habits.

Not Making Loan Payments While in School

Did you know you can start paying off your student loans while you’re still in school? Yeah, I didn’t either.

When I was in college, I was certain I’d find a well-paying job after graduation. My loan balance was filed under the “worry about it later” category. It wasn’t until much later that I learned a hard truth – if I had paid just $50 a month, I could have saved hundreds in accrued interest.

Start paying back those loans as soon as possible, even if you can only afford ten bucks a month. You’ll still make a dent in the total balance, and the solid repayment habits you develop in college will pay dividends when life gets crazy after graduation.

Not Researching My Student Loans

I knew while applying to college that I’d have to subsidize my tuition with student loans. Before I made my decision, my parents told me to pick an affordable school where I wouldn’t need to borrow more money than I expected to earn in my first year out of school.

I wanted to be a journalist, and the average starting salary for a reporter was around $26,000 a year. I planned to take out $24,000 total, so I felt good borrowing slightly less than my future salary.

That was the only research I did into my student loans. I didn’t examine what my monthly payments would be or what it would be like to actually live on $30,000 a year while repaying my balance.

When I graduated, I got a job making $28,000 a year and was shocked when my first student loan payment came due. The minimum payment was $350 – or 20% of my take-home pay. After rent, utilities, groceries, gas and loans, I had little left over to save for retirement, travel or spend on hobbies.

If you’re not sure how much money you’ve borrowed, it’s time to take a closer look. I had so many friends in college who had no idea how much they were taking out. A few years ago, my alma mater, Indiana University, started sending out annual letters to current students showing them how much they’d pay every month. The result? Borrowing dropped 16%.

Talk to your financial aid office about your loans and see if you can take out less next year. If you’re using loans for living expenses, consider getting a part-time job to cover those instead. The less you borrow now, the less you’ll have to repay down the line.

Succumbing to Peer Pressure

When I was in high school, I heard a lot of lectures about peer pressure. Teachers told us not to do things just because the “cool kids” were doing it. They’d tell us to avoid alcohol and drugs and stick to our own values.

Unfortunately, no one explained how your peers could pressure you to spend more money. I can recount dozens of instances where I didn’t want to go out for dinner or go shopping, but gave in because my friends were doing it.

It’s so tempting to live the good life in college, putting off the stress of adult life until after graduation, but it’s also important to learn how to say no and think about long-term consequences. You can always strike a balance between having fun and staying on top of your responsibilities.

Not Applying for More Scholarships

Students usually assume the only time to apply for scholarships is before they start college. The thing is, there are plenty of scholarships available for current students. While I applied for a couple scholarships during my time in school, I didn’t take the applications seriously.

I told myself applying for scholarships was a waste of time. “What’s the point,” I’d think. “I probably won’t get it.”

That line of thinking probably cost me thousands of dollars, and it wasn’t until I was repaying my loans that I realized how much money I’d left on the table. If it seems like a hassle to apply for a $500 scholarship, consider how long it would take you to earn that amount in the real world.

Avoiding Credit

One of the biggest mistakes a college student can do is not track their credit history. A credit report is like a financial grade that lenders, landlords and sometimes even employers use to gauge your creditworthiness. If you have a low credit score or no credit, you probably won’t qualify for an apartment by yourself and will need a cosigner.

Thankfully, I didn’t have to worry too much about my credit while I was in college. My parents made me an authorized user on their credit cards, so while I was attending class and partying on the weekends my credit history was slowly growing.

If you don’t have a credit card right now, and you think your parents could be in a position to help, ask your parents if you can become an authorized user on their card or ask them to cosign on a student credit card.

Using a credit card to improve your credit history is simple if you have great self control. Pay a couple small bills with your card every month and then pay the balance in full once the monthly statement posts. Doing so regularly can give you a huge leg up after graduation.

But do remember a credit limit is not “free money” and should be looked at as a tool for your financial health. A credit card only has benefits if you pay it off in full every month, carrying over debt could be problematic for your financial future.

This blog post does not constitute, and should not be considered a substitute for legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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Source: mint.intuit.com

March 31, 2021

MintFamily with Beth Kobliner: 3 Ways Your Kids Will Redefine the American Dream

A friend’s 20-something son shocked his parents with his post-graduation plans: He was moving to Southeast Asia to sell selfie sticks.

Millennials in a nutshell, #amiright?

But who can blame them for taking non-traditional paths, given the poor financial hand they’ve been dealt: record levels of college debt, uncertain job prospects, stagnant wages, and more. It’s why one in three Millennials is deeply dissatisfied with their financial situation, according to a much-quoted new study from George Washington University and PwC.

Findings from a recent Harvard survey cut even deeper: half of Millennials say the American Dream is dead. Yep, that cornerstone of post-war America—the house, the car, the upwardly mobile career track—is about as relevant to them as black & white TV. To parents raised on the mythology of the American Dream, that’s grim news.

But the situation may not be as dire as it appears.

As they’ve done with everything from communications to careers, Millennials are redefining what it means to lead a “better life” (something parents see as key to the American Dream, according to a 2015 60 Minutes/Vanity Fair poll). This new paradigm is rooted in the experiences of people who came of age after the financial crisis of 2008, and reflects how they see the world. It offers a flexible lifestyle (one that some might see as transient) and a reworking of the traditional measures of success.

Here are three ways that our kids will make their own American Dream—and thrive.

1. They’ll rethink what college means—and how to pay for it.

Two-thirds of parents say the American Dream includes sending their kids to college, according to a September poll from the youth media company Fusion. These moms and dads are right to think this, as college grads earn about $1 million more over their lifetimes.

For Millennials, cost and career aspirations are informing this major life decision more than ever (call it pragmatism if you want). Gone are the days of selecting a school based on its bucolic campus or dominant football program. Kids (and parents) want more value—and less debt.

That’s why it’s so critical to start the college cost conversation early—like 9^th grade-early. Want an incentive? A start-up called Raise.me allows high schoolers—as early as freshman year—to earn “micro-scholarships” from over 100 colleges. Got an A in chemistry? Won the lacrosse playoffs? Volunteered at your local animal shelter? Each awesome achievement can earn your kid $500 to over $1,000 from various colleges. Even “mayor” of Millennials Mark Zuckerberg backs it: Facebook is one of Raise.me’s main supporters.

Best way to avoid the college cost guessing game? Fill out the FAFSA (Free Application for Federal Student Aid)—the key to scholarships, grants, work-study, and low-rate federal loans. The form is notoriously long and complicated, but it’s getting better! Starting this year, you can access the FAFSA on October 1, 2016 (up from January 1, 2017). Why the new, early start? It means you’ll be able to auto-fill the form for the 2017-18 school year using your 2015 tax return data. (More details here.)

Parents of kids who excel in hands-on environments can encourage them to consider the growing trend of apprenticeships (a traditionally European idea that’s catching on here in the U.S.), particularly programs offered in tandem with a community college degree.

2. They’ll understand that owning your own “home sweet home” is only sweet when you can afford it.

In 1986 (back when I was graduating from college!), 76% of young people saw owning a home as essential to the American Dream. Today that’s down to 59%, according to the Fusion poll.

That means your kid is more likely to bunk with you—or rent—than take on a mortgage she can’t afford (so don’t turn her bedroom into a home office just yet). If she does move in with you, make sure she uses this time as an opportunity to save! (And work out any financial details in advance with this helpful guide from eHow.com.)

Renting has traditionally gotten a bad rap, but it lets your kid explore—new towns, new jobs, new people!—without being stuck in one place. Take our selfie-stick seller: his Southeast Asia stint lasted less than a year before he was back in the states and settling into a new city and new gig. Like his fellow Millennials, he’ll probably rent for several years. Buying may not even cross his mind until his early 30s. A Zillow study shows the average first-time homebuyer is now 33, up from 29 in the 1970s. Of course, you’ll want to talk to your kid about the realities of owning a home, including how to sock away a chunk of money for a down payment once she’s ready.

3. They’ll value happiness and independence over a huge paycheck.

The entrepreneurial goals of Millennials can sometimes seem a little, er, lofty (like the selfie stick plan that didn’t exactly take off), but thankfully, many are starting to pace themselves.

A study from Upwork, a company that helps businesses find freelance workers, showed that 62% (mostly Millennial) freelancers planned to work a full-time job and moonlight on the side for two years before quitting to follow their dreams. Two years may not be a magic number (a specific financial goal would be safer), but at least they’re earning—and learning—prior to taking the leap.

Today’s young people aren’t all work and no play, either. Millennials’ drive for success, salary, and even entrepreneurial goals pales in comparison to their desire to spend time with family and friends, which they rank as “one of the most important things” in their lives, according to the Harvard survey.

The takeaway? We’re raising a generation that demands independence, flexibility, and a true work/life balance. Perhaps that’s the new American Dream.

Sounds like something we can all believe in.

How do you define the American Dream for your kids? Tell me on Twitter using #NewAmericanDream.

BethKobliner

Beth Kobliner is the author of the New York Times bestseller Get a Financial Life, and is currently writing a new book, Make Your Kid a Money Genius (Even If You’re Not), to be published by Simon & Schuster. Visit her at bethkobliner.com, follow her on Twitter, and like her on Facebook.

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March 23, 2021

New Parents! The College Savings Secret You Haven’t Heard Of

Want to know a little secret? Less than 10% of Americans are “in the know”……

it’s a financial tool that could more than double your money for college over your child’s lifetime, and it’s called a 529 College Savings Plan.

What is a 529 College Savings Plan?

A 529 College Savings Plan is widely considered the best way to save for college. It is a tax-advantaged investment account designed to help you pay for college. It works like a Roth IRA – you put in post-tax dollars, and then the gains and qualified withdrawals are tax-free.

These accounts are more flexible than you might think. Eligible institutions include any higher ed institution that qualifies for federal financial student aid, including state universities, out-of-state colleges, private colleges, and many institutions abroad.

And it goes beyond tuition – you can also spend the money on school fees, room and board, books, computers & related equipment, and special education expenses.

Lastly, you can always withdraw the principal (i.e., your original, post-tax contribution) without paying any taxes or penalties. However, if you do spend on any nonqualified expenses, you’ll pay taxes plus a 10% penalty on the gain.

But I don’t have any money to save!

Want to know an even bigger secret? Anyone can contribute to any child’s 529. So even if you’re a little constrained on your finances (you just had a baby, after all!), you can still get ahead.

Your friends and family are probably asking how they can help. Once you’ve got enough diapers, just ask for contributions to your child’s 529. Baby showers, early birthdays, and other milestones can be great moments to kickstart that college savings plan.

Okay. How do I get started?

Here’s where it pays to do a little research. Each state has its own 529 College Savings Plan, but you are not required to sign up for your state’s plan. Check if your state offers a generous tax-deduction for using your state plan, but otherwise, you’re free to choose any plan in the country. If that’s the case, look for a plan with low fees, reputable management, and tools to allow other people to contribute. When choosing your investment portfolio, consider keeping it simple with a passively invested, age-adjusting portfolio.

If you’re overwhelmed by the options, don’t go back to using a regular savings account! You’d give up thousands of dollars in lost investment gains and tax benefits. We built CollegeBacker to make it easy to find the right plan, choose the right investment portfolio, and get your friends & family involved.

CollegeBacker is an SEC-registered investment adviser dedicated to helping families save for college. With CollegeBacker, parents can find the right tax-advantaged 529 College Savings Plan, determine a personalized savings goal, and invite family & friends to contribute. Plus, anyone can use CollegeBacker to kickstart another child’s college savings plan.

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Cities With the Youngest Workforces – 2021 Edition – SmartAsset

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While Baby Boomers and Generation X are now the bosses at many companies, more than 25% of the workforce is younger than 30. This means that Generation Z (born between 1997 and 2012) and millennials (born between 1981 and 1996) are emerging as the generations to soon comprise the largest percentage of workers.

Starting your career at a young age provides more time to build up your savings and create a retirement plan with a financial advisor. Some cities offer younger workers more opportunities for gainful employment and SmartAsset crunched the numbers to find out where younger employees make up the biggest percentage of the local workforce.

To do this, we studied data on the 100 largest cities in the U.S., analyzing the number of workers younger than the age of 30 as a percentage of total workers. For details on our data sources and how we put all the information together to create our final rankings, check out the Data and Methodology section below.

This is SmartAsset’s second annual study on the cities with the youngest workforces. You can read our 2020 edition here.

Key Findings

Cities with youngest workforces dominate in education, healthcare and social assistance. More than 27% of workers in our top 10 cities have jobs in educational services, healthcare and social assistance. This means that across the top 10, these industries attract or have opportunities for almost six times more workers than construction, almost four times more than manufacturing, almost three times more than retail and almost four times more than finance and real estate. One notable exception is Norfolk, Virginia: The world’s biggest naval base employs almost 21% of the city’s workforce in the armed forces (compared to less than 19% in education, healthcare and social assistance).
Midsize cities attract the youngest workforces. Midsize cities beat out the biggest cities in the top 10 of this study. Even with an average 29-and-younger workforce of about 73,000 (compared to 368,000 across the largest 10 cities in the study), the cities in the top 10 have workforces comprised of about 36% younger workers. This average is only 28% across the largest 10 cities.

1. Norfolk, VA

With a workforce of almost 42% that is younger than 30, Norfolk, Virginia ranks at the top of our list. This city also has the fifth-highest workforce participation rate for younger workers in our study, at 80.4%. One of the major drivers behind the city’s employment of people in this age group is the naval base, which is the largest in the world. Our study reveals that almost 21% of all Norfolk workers are employed by the armed forces.

2. Madison, WI

Home to the University of Wisconsin, Madison has 38.93% of its workforce made up of people ages 16 to 29. The labor force participation rate for this age group is 74.8%, 25th-highest in our study. Education, healthcare and social assistance industries are the biggest employers in Madison, comprising 32.57% of the total workforce.

3. Lubbock, TX

Lubbock, Texas is yet another college town, the home of Texas Tech. People ages 16 to 29 make up 37.79% of the workforce in this city. But the workforce participation rate for this cohort is only 66.3%, ranking 80th out of 100 in our study. The relatively low figure for this metric could be impacted by the large university population, which, although eligible for the workforce, is largely unemployed during its student tenure.

4. Lincoln, NE

Lincoln is the home of the University of Nebraska. This city has a total of 166,354 workers, and 59,184 are younger than 30 – making up 35.58% of the workforce. Education, healthcare and social assistance are the biggest industries in the city, employing just over 27% of all workers. Retail is also a major industry in the city, hiring 10.85% of the workforce.

5. Pittsburgh, PA

Pittsburgh, Pennsylvania used to be dominated by steel production. But now, the University of Pittsburgh Medical Center is the major employer. In fact, education, healthcare and social assistance jobs make up 32.03% of the city’s workforce. And workers ages 16 to 29 make up 35.25% of the total workforce.

6. Tucson, AZ

Tucson, Arizona has 98,591 workers younger than 30, with a workforce participation rate of 69.2% for that age group. People ages 16 to 29 represent 35.22% of total workers in this city.

7. Boston, MA

Boston, Massachusetts has the biggest workforce in the top 10 of this study, with 426,238 workers. And 149,695 of that force is younger than 30, meaning that 35.12% of the total workforce in Beantown is 16 to 29. Boston is another city where education, healthcare and assistance services dominate, employing 31.17% of the workforce.

8. Cincinnati, OH

Younger workers make up almost 35% of the total workforce in Cincinnati, Ohio. The number of workers ages 16 to 29 is 57,014, and their labor force participation rate is just over 70%. Education, healthcare and social assistance are the biggest industries, employing just over 27%. But manufacturing remains important in Cincinnati, accounting for 10.62% of the workforce.

9. Minneapolis, MN

Minneapolis has the seventh-highest labor force participation rate for workers younger than 30 in our study – almost 80%. Overall, younger people (ages 16 to 29) make up 34.87% of the workforce in the city. Almost 27% of those employed in Minneapolis work in education, healthcare and social assistance, with retail comprising more than 10%.

10. Richmond, VA

Richmond, Virginia claims the 10th spot on our list, with a labor force participation rate of just over 78% for people ages 16 to 29. This age group makes up more than 34% of the city’s total workforce. More than 24% of the city’s total workforce is employed by education, healthcare and social assistance.

Data and Methodology

To find the cities with the youngest workforces, we examined data on the 100 largest U.S. cities. Using population data and labor force participation rates from the Census Bureau’s 2019 1-year American Community Survey, we found the percentage of the workforce younger than the age of 30 (i.e. between 16 and 29 years old) in each city. Cities with the highest percentages of younger workers ranked at the top of the list, and those with the lowest percentages of younger workers ranked at the bottom of the list.

Tips for Managing Your Money at the Start of Your Career

It’s never too early to invest in expert advice. Even if you’re younger, it may make sense to find a financial advisor help with your money. Finding the right financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with financial advisors in five minutes. If you’re ready to be matched with advisors, get started now.
The key to retirement savings is to start as soon as possible. If you have access to a workplace retirement savings program like a 401(k), make sure you take advantage of it.
Double-check your paycheck. Knowing how much money you make after taxes is key to financial planning. Use SmartAsset’s free paycheck calculator to see what you’ll actually see on your check after everything is taken out.

Questions about our study? Contact [email protected]

Ben Geier, CEPF® Ben Geier is an experienced financial writer currently serving as a retirement and investing expert at SmartAsset. His work has appeared on Fortune, Mic.com and CNNMoney. Ben is a graduate of Northwestern University and a part-time student at the City University of New York Graduate Center. He is a member of the Society for Advancing Business Editing and Writing and a Certified Educator in Personal Finance (CEPF®). When he isn’t helping people understand their finances, Ben likes watching hockey, listening to music and experimenting in the kitchen. Originally from Alexandria, VA, he now lives in Brooklyn with his wife.

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This blog post does not constitute, and should not be considered a substitute for legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

1. They’ll rethink what college means—and how to pay for it.

2. They’ll understand that owning your own “home sweet home” is only sweet when you can afford it.

3. They’ll value happiness and independence over a huge paycheck.

What is a 529 College Savings Plan?

But I don’t have any money to save!

Okay. How do I get started?

Apply for the FAFSA Together

Explain Federal and Private Student Loans

Encourage Your Child to Apply for Scholarships

Help Them Understand their Student Loans

4 Issues to Consider Before Using a Credit Card to Pay for College

1. Sky-High Interest Rates

2. Fees Might Negate the Rewards

3. Fewer Repayment Options

4. Effect on Your Credit Score

Be Smart About Paying for School

Types of College Saving Accounts

Encourage Your Child to Save

Make Saving Automatic

Open a Cash-Back Card

Apply for Scholarships

Key Findings

Data and Methodology

Tips for Managing Your Money at the Start of Your Career

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