The redesigned 2024-25 Free Application for Federal Student Aid (FAFSA) is now available around the clock, following a weeklong soft launch, during which the form was open for as little as 30 minutes a day. Although the new form is simpler and shorter, students and families are still contending with technical glitches, changed processes and confusing questions.
“There have been some bumps in the road in terms of accessibility and functionality,” says Steve Colón, CEO of Bottom Line, a college access organization that works with first-generation students from low-income backgrounds in New York City, Boston, Chicago and Ohio. “On the positive side, we’ve heard that for some students it’s taking about 20 minutes to complete the FAFSA, which is wildly different from what it was before.” In recent years, completing the FAFSA could take an hour or longer.
Experts urge students to submit the new FAFSA as soon as possible, since some types of financial aid have priority deadlines or draw from a limited pool. About 1 million students have submitted the new FAFSA as of Jan. 8, according to U.S. Education Department data. That’s roughly 6% of the 17 million who typically submit the form each year.
Perplexed about something on the new FAFSA? Here are its five most-confusing aspects, and strategies to deal with them — so you can submit your form ASAP.
1. Persistent technical glitches
Technical glitches on the FAFSA can be frustrating. For example, some users report getting repeatedly logged out before they can finish their form. If you encounter issues like this, it’s OK to take a break and come back to the form a bit later.
“There is not a huge rush on filling it out today versus tomorrow,” says Karen McCarthy, vice president of public policy and federal relations at the National Association of Student Financial Aid Administrators. “So it is possible to come back in a few days, and hopefully, some of these glitches will be worked out by that point in time.”
Other glitches remain baked into the form. For example, some school names are getting cut off on the FAFSA. This can be confusing if a school you’d like to send your FAFSA to has multiple campuses. If this happens, students can do an internet search for a school’s Federal School Code, and use that number to pull it up in the FAFSA.
The situation is evolving day by day. The latest list of known FAFSA glitches and workarounds is available on StudentAid.gov.
2. You can’t correct submitted answers until late January
If you submitted your portion of the FAFSA but realized you made an error, you may have to wait a few weeks until you can fix it.
Students will receive an email with their FAFSA Submission Summary — which details submitted answers, Pell Grant eligibility and their Student Aid Index — once the Department of Education processes their completed form, which is slated to start in late January. Then, you can make any necessary corrections to your submitted answers.
Even if you make a correction later on, it won’t change the submission time stamp on your FAFSA, McCarthy says. This could be important for students applying for financial aid that is first come, first served or that has an early application deadline.
“If a correction is made on January 30, that application date is not updated to January 30. It still records when the FAFSA was initially filed,” McCarthy says.
3. Undocumented parents can’t access the form yet
There’s a new process for undocumented parents to request an FSA ID this year — but it’s not working yet, and there’s no timeline for when it will be. Until this issue is fixed, students whose parents don’t have Social Security numbers (SSNs) cannot submit the FAFSA.
Taking some time to get organized now can help you complete the FAFSA more easily once it’s available. If you’re a parent without an SSN, continue to reach out to support structures, like college access organizations or school counselors, Colón says.
“The moment that the tool becomes available, it’s critical to get in there and get started,” says Colón. “While it is a greatly simplified form, it’s not going to be for students whose parents don’t have an SSN, so it’s going to be really important that they get all their financial paperwork ready as soon as possible to give themselves the time they will need to complete the form.”
4. Invitation process for contributors
This year, students and parents fill out and submit their relevant portion of the FAFSA separately. Either the student starts and completes their portion of the FAFSA and “invites” the parent, or a parent can start and complete their section, then they invite the student.
That’s different from past years, when a dependent student and their parents had to sit down together and fill out a single form.
“It’s a role-based process, where it was not before,” says Jodi Vanden Berge, director of college planning and outreach at EducationQuest, a Nebraska-based college access nonprofit.
5. Confusing questions
Though the new FAFSA is generally more straightforward than in years past, borrowers have reported that several questions are confusing or unclear. Here are two to watch out for:
Free lunch question
This has proved confusing, since some school districts introduced free and reduced lunch programs for all students, regardless of their family’s financial situation, during the pandemic.
Under the federal benefits question — At any time during 2022 or 2023, did the student or anyone in their family receive benefits from any of the following federal programs? — “free or reduced-price school lunch” is an option.
If a student received free or reduced lunch, regardless of the circumstances, they should indicate that on the FAFSA, says Vanden Berge.
Dependency question
Some students have reported confusion about this new question used to establish dependency: Are the student’s parents unwilling to provide their information, but the student doesn’t have an unusual circumstance that prevents them from contacting or obtaining their parents’ information?
If a student selects “yes” — that they don’t want to provide parent information — then, the parent can’t fill out their section of the FAFSA, Vanden Berge says. This would disqualify a student from most federal financial aid, apart from direct unsubsidized loans, meaning they can’t access grants, work-study or subsidized loans, which don’t accrue interest while they’re in school.
If you do make a mistake, remember that you can request a correction once your form is processed.
In this episode of NerdWallet’s Smart Money Podcast, hosts Sean Pyles and Sara Rathner share the best money moves of 2023 as submitted by their fellow colleagues. Some of the highlights include saving aggressively to prepare for future expenses, getting rid of private mortgage insurance, automating finances for budgeting and planning, setting up 529 college savings plans for children, shopping around for the best mortgage rates, and understanding the difference between an emergency fund and a rainy day fund.
Check out this episode on your favorite podcast platform, including:
Episode transcript
This transcript was generated from podcast audio by an AI tool.
Sean Pyles:
If you’re a loyal fan of the show, it’s possible you stay until the very end of each episode and if you do, you always hear us say, “Until next time, turn to the Nerds.” Well, today, dear listener, we are turning the show over to the Nerds. We present the best money moves of 2023 by our fellow Nerds.
Amy Knight:
This year I learned how to explain the effect of compounding using a lovely seasonal analogy, snow. You think of your money like snow. When you spend it, it melts and runs away, but when you save it, any new snowfall sticks to the snow that’s already there.
Sean Pyles:
Welcome to NerdWallet’s Smart Money Podcast. I’m Sean Pyles.
Sara Rathner:
I’m Sara Rathner.
Sean Pyles:
This episode finishes off our Nerdy deep dive into the end of 2023. This is it, Sara, the finale of our last series of the year.
Sara Rathner:
The piece de resistance.
Sean Pyles:
Yes. We sent a notice out calling all Nerds, asking for the best things our colleagues did with their money in 2023, and I mean all Nerds, IT, HR, everybody, even the corner office, and today we’re going to share their money wins.
Sara Rathner:
I love this. Before we start, you and I are Nerds, too, right, Sean? Should we start with our money wins for 2023?
Sean Pyles:
I think we should. Sara, give us yours.
Sara Rathner:
Yeah. This sounds like a weird money win, but I have said, on the show before, one of the pieces of advice that I got when I was younger was to save as aggressively as you can for as long as you can because your life will get more complicated as you get older. Well, I have reached the point where my life is complicated and expensive, and I will say that because I had spent those years putting money away as best I could, I had money on hand to do the things that I needed to do this year.
There were some unexpected repairs to our house that we had to do. We ended up replacing our car because we had a baby, and that was probably one of the most expensive things I did in 2023 was pay all those hospital bills, and now I’m paying daycare bills, so this kid will cost me money until he’s 35 and then maybe he’ll be independent by then. We’ll know.
Sean Pyles:
They say you reap what you sow. You had been sowing savings for years and years, and now you are seeing the benefits of that, which is great.
Sara Rathner:
Yeah. What it has allowed us to do, and by us, I mean I say my husband and I, is say yes to the things we need and know that we have the money on hand. That’s really nice when something in your house breaks or there’s something that you want to do like travel or a night out with friends that’s going to cost a lot of money. We can say yes to the things that mean something to us because we spent so long just pocketing and putting money away, living as well below our means as we could. Now, I think we’re living at our means, which is nice.
Sean, what about you? What is your money win for 2023?
Sean Pyles:
Well, it’s a little Nerdy and a little in the weeds maybe, but I got rid of my private mortgage insurance on my house after going into war with the bank that owns my mortgage. It was not a fun process, but I came out the victor, and I’m so proud of myself for that because the bank that owns my mortgage is not very nice. That’s my money win for 2023.
Sara Rathner:
I’m surprised you had to go to war. Isn’t it just like, once you hit 20% equity, you have to refinance, or how does that work?
Sean Pyles:
Oh, yes, they barraged me with a mountain of paperwork and time delays and bureaucratic processes that I actually detailed in a Money Hot Takes episode of Smart Money. I think that you were out on maternity leave, Sara.
Sara Rathner:
Sean Pyles:
Will do. Okay. Great. Well, before we get into the Nerd’s best money moves of 2023, a reminder, dear listener, that we always love hearing from you. Leave us a voicemail or text the Nerd hotline at 901-730-6373, that’s 901-730 N-E-R-D, or email a voice memo to [email protected].
All right. Sara, are you ready to hear from our Nerdy colleagues about their best money moves of 2023?
Sara Rathner:
I am. Let’s see what they all learned this year and maybe we could take some of that advice and apply to our own finances.
Sean Pyles:
Yeah. I mean, that’s the idea, so let’s start with the boss. Tim Chen is the founder and CEO of NerdWallet, and he did an energy efficient move this year.
I switched from a Mercedes SUV to a Toyota Sienna. I’m getting twice the gas mileage. I’m using the cheap gas, and I’m paying about a 10th as much every time I service the car.
Sara Rathner:
Well, Sean, it is so true that you really save money on servicing when you don’t have a luxury car. Just getting a new battery or oil filter can be less expensive.
Sean Pyles:
Sara Rathner:
Yeah, new to me, and it’s a hybrid, so the mileage is pretty sweet.
Sean Pyles:
Nice. All right. Well, let’s hear from another Nerd. Skylar Damiano is an IT administrator here at NerdWallet.
Skylar Damiano:
My partner and I are accelerating our marriage to the end of this year because it’ll save us a ton of money in the long run via tax benefits. These are things that we just never thought about when we were single or, even in our case as queer people who never really thought about marriage beyond our domestic partnership, but I’ve also learned that I will never stop learning about the financial world around me. I can’t possibly know everything related to financial wellbeing, but the more I research and the more I practice good habits, the more likely I am to carry those good habits into the future.
One that stuck with me from last year is not spending beyond my means. I now wait until I have funds available before I make a purchase like a new smartphone or a new toy or a hobby that I want to get into. In this case, I want to become a DJ in the next year. I’m not spending any money on that equipment though until I for sure have enough to save on it, because if I have the option to not rely on credit, but instead use my credit card to my advantage via cashback, it’s far more rewarding for me down the line.
Sean Pyles:
Sara, waiting until you have enough money to actually purchase something you want is a timeless piece of financial advice, one of the most basic and most important.
Also, Skylar, I would love to hear a DJ set when you are up and running with your equipment.
Sara Rathner:
This is near and dear to my heart, but utilizing a credit card for points or cashback instead of carrying a balance, that is chef’s kiss. And Skylar wasn’t the only Nerd highlighting this idea. Here’s Tom Lehmann, an account executive for NerdWallet.
Tom Lehmann:
The best piece of financial advice I would have to say is live well below your means. What a lot of people do is, over the course of their career, they tend to make more money, and when that happens, they tend to buy more stuff. They buy a cooler car, bigger house, more clothes, everything. I call that the lifestyle tax. If you really want to take control of your finances, what you have to do is you have to increase the gap between how much you make and what your expenses are.
I think making more money will naturally happen to a lot of people as they progress in their career, so I think the real key is figuring out where you could cut costs and be minimalistic about everything in your life. Just getting rid of stuff and getting out of the habit of buying stupid stuff every time. Every time you buy one thing, you’ve got to get rid of two in your house. That’s a great way to start.
Sara Rathner:
Sean, I think a lot of us often take the opportunity at the end of the year or the start of a new one to get rid of stupid stuff. The harder part is Tom’s advice to get out of the habit of buying stupid stuff in the first place.
Sean Pyles:
Yeah, preaching to the choir, Sara, because I’m sure that I have some stupid stuff on the way to my front door as we speak. All right. Well, let’s hear now from Sally French. She’s a travel writer here, and she’s been on the show before. Here is her takeaway from 2023.
Sally French:
My biggest money lesson is to always ask if your travels go wrong. I was caught up in the United meltdown as well as I had a canceled Southwest flight, and even though I was able to get another flight, I was still delayed. While I wasn’t entitled to any compensation officially, I still asked the airline customer service and I asked nicely, and in both instances, I got either a flight credit or miles from the airline. Even if your travels are disrupted, even if you’re not entitled to compensation, it doesn’t hurt to ask, because like I did, I was able to get some money back.
Sara Rathner:
Love it. Always ask. What do you have to lose? All they can say is no and you’re on your way, or not and you’re stuck at the airport indefinitely, but you could still ask.
Sean Pyles:
Yeah. You’re hopefully on your way unless your flight is canceled twice, but yes, it’s always worth asking. Next up, we have Kevin Berry. He leads multimedia content here at NerdWallet and happens to be my direct boss. You’ve heard his name in the credits of this show as a fact-checker and editor.
Kevin Berry:
I think my big money takeaway from 2023 is that automation of your money can be really, really valuable and super helpful when it comes to budgeting and planning. I spend, whatever, an hour every January looking at everything and the money coming into my checking account, and I had set up all these automated like, “Send this money here. Send this money to an investment account. Send this money to a savings account,” and just set it and forgot about it and let it do its thing this year, and then that has really come back to help me.
For example, the property tax bill showed up, and I was like, “Whoa, it went up, it’s thousands and thousands of dollars,” but then I went to my account that I’d set up for automated savings for property taxes because I knew this bill was coming, right? Kevin in January knew Kevin in November had to pay this bill, and lo and behold, the math held up and there was the right amount of money there, and that just took a lot of stress out of it. Yeah, I think my money lesson is invest in automation for things that you know you’re going to need to pay for or want to pay for, even like a vacation. That’s just been a real stress reliever and time saver on my end in 2023.
Sara Rathner:
Oh, man, Sean, automation can absolutely save your sanity. I have quite a few automated contributions in my own finances. A big one, two big ones, is I automate contributions for my largest expenses, which are my mortgage and daycare, and that comes out of my checking account into a joint savings account. My husband also contributes, and then the money is whisked away by an automatic clearing house once a month or once every other week, depending on the bill.
Sean Pyles:
Lovely. You just need to make sure that the money is actually automatically going into that checking account so it can then be paid elsewhere.
Sara Rathner:
Then there’s automation, obviously, into my retirement account, my 401(k) that I set up at work. If you work for a place where you have to opt into the 401(k) when you first start your job, do it. Because the longer you wait to get that started, the less money you’re able to save up, and you might even be missing out on employer match. If you’re starting a new job or if you have been in your job for a while, but you just haven’t bothered to set up your retirement accounts yet through your employer, maybe make this the year you do that.
Sean Pyles:
Absolutely. Well, I think I’m going to take a page out of Kevin’s book and set up automated deposits into an account for my car’s annual registration, because every year, June Sean curses every-other-month-of-the-year Sean for not saving up for that in advance. Okay. Our next piece of advice is from Hannah Cho. She’s our Nerdy vice president of content.
Hanah Cho:
This year, I’m really proud of finally sending up 529 college saving plans for my two kids. I have three kids, and I have one set up for my oldest, and I finally got around to setting up two for my youngest. I’m really trying to lean into taking advantage of time. They’re still very young where I still have probably 10 to 12 years before they head off to college.
Sean Pyles:
Yes. All of those years of investing and compounding will work wonders. Sara, I know you just had your baby like five minutes ago, but have you set up a 529?
Sara Rathner:
I have, so by the time my kid is 18, he’ll either be well on his way to college or he’ll be fighting in the climate war of 2041.
Sean Pyles:
That’s grim, but probably not inaccurate.
Sara Rathner:
It’s grim, but I want to set him up for a realistic life.
Sean Pyles:
Right. He’ll be able to buy plenty of munitions on the battlefield.
Sara Rathner:
Sean Pyles:
Well, Sara, you weren’t the only Nerd to procreate this year. Adam Smith did as well, and he’s all over the 529 planning.
Adam Smith:
In 2023, my wife and I actually had twin boys, and the first thing that came up once I heard that was knowing that I’ve got to pay for potentially two college educations at the same time, so another thing that crossed my mind was what if one of them goes to college and the other one doesn’t, or what if neither of them go to college? What’s the best way to approach this? We actually found that there’s a change to the 529 plan, which is how a lot of people save for their child’s college education, and so should your child or if one of our twins or both of them decide not to go to college in the future, you can actually roll the 529 plan into a Roth IRA, and the beneficiary of the 529 plan now becomes the owner of that Roth IRA. Traditional Roth IRA rules apply when transferring ownership, but, that being said, it’s a great savings vehicle for college planning or setting up a nice little nest egg for my twins in the future.
Sean Pyles:
You know what, Sara? I love that Adam knows that there are options for his kids, college or no college.
Sara Rathner:
Yes, and this is a huge way to get your kids started on their financial lives regardless of what they do after high school.
Sean Pyles:
All right. Up next is Alison McCoy, VP of brand marketing at NerdWallet.
Alison McCoy:
My husband and I, we’ve officially begun our home-buying process, and one of the best things we did this year was shop around for the best mortgage. I was pretty surprised at the options out there even in this high interest rate environment and feel really confident that we found the right option for us, that makes sure we’re not leaving any money on the table.
Sara Rathner:
Yes, always shop around for just about anything, but especially mortgage rates especially now.
Sean Pyles:
As Alison knows, we have a lot of mortgage and home buying information all over NerdWallet. We have a whole team devoted to that subject matter, and Abby Badach Doyle is a member of that team. Here’s her best money move of 2023.
Abby Badach Doyle:
This year, I learned the difference between an emergency fund and a rainy day fund. People use those terms interchangeably. I know I sure did, so I never really thought about it, but they’re actually two pretty different things. An emergency fund is for big major surprise expenses like major unexpected car repairs, new carburetor, and a rainy day fund is to help you pay for those things that aren’t necessarily emergencies, but are still outside of the scope of your typical monthly budget, like “Wow, the car is dirty after this camping trip. Can we please pay someone to do a deep clean and a full detail?”
Anyway, in our savings account, we’ve always used named sub-accounts for goals like holiday shopping and travel, but then we had this amorphous blob of money that I always felt so weird and guilty tapping into. Even though we’re disciplined savers and there was always enough there, it always just felt weird. This year, I split the blob into separate rainy day and emergency fund accounts, and that took away all of the stress and weirdness. Mentally, it was so helpful to not feel bad about spending money that I knew that we needed to spend on stuff that we knew was coming and to know that we’re still on track with our emergency savings for the bigger, unexpected stuff.
If you haven’t tried naming sub-accounts yet, I highly recommend it, and review the names often to make sure that they’re still working for you. If you need to set a savings goal for your emergency fund, try using an online calculator. NerdWallet, of course, has a great one. And then name that and separate it from your rainy day fund and from the rest of your other savings goals. That might be a small thing, but it was super helpful to me this year, and I hope that it helps you, too.
Sean Pyles:
Sara Rathner:
Sean Pyles:
Sara Rathner:
Sean Pyles:
I feel like we should do a chest bump or a high five after that. Anyway, Sara, do you have an amorphous blob of money that you feel weird and guilty tapping into?
Sara Rathner:
Always with the guilt, but the blob of money is divided into several smaller sub-blobs in the form of a few accounts with different purposes, and that helps me stay organized when it comes to deciding which accounts to use when I need to fund something.
Sean Pyles:
Love it. I mean, it’s no secret to devoted Smart Money listeners that I have many sub-blob accounts that I use on a daily basis. Also, nice call out to our NerdWallet calculators. Okay. On to our final Nerdy piece of advice.
Sara Rathner:
Already? That was fast.
Sean Pyles:
I know. Well, the good news is, Sara, that we’re always here, all of us, all of us Nerds, and we are here for you and our listeners. Our final guest is Amy Knight. She is a spokesperson for NerdWallet UK, and she has a money lesson to share about compound interest and the beauty of snowfall.
Amy Knight:
I have a money lesson to share about compound interest. This year, I learned how to explain the effect of compounding using a lovely seasonal analogy, snow. I think this is a great way to think about saving, and it can be helpful when you’re trying to start taking a longer-term view of your finances.
The lesson is this. You think of your money like snow. When you spend it, it melts and runs away, but when you save it, any new snowfall sticks to the snow that’s already there. New snowfall is your wages, maybe a bonus or holiday gift, an inheritance, maybe you sold an asset. Importantly, snow falls as interest. If you’re not actively saving, new snowfall is not going to stick. It’s going to melt and run straight out of your account.
We see in real life that fresh snow sticks a lot more when there’s already snow on the ground. I’m going to give a shoutout here to my friend Kim in Wisconsin who will soon be shoveling her driveway every day. You start with a thin layer, and as more snow falls, it builds up, and this is very like compounding. Gradually, your snow pile of savings compounds, and the bigger it gets, the more interest sticks to your money. As you watch it grow, you may be less tempted to melt the whole lot on an impulse purchase.
I’d love to know what you think of this analogy, Sean? This winter, if you are able to leave just a little savings in your account after the holidays, think of it like leaving a thin layer of snow on the ground ready for 2024’s snowfall to stick to. Don’t forget the Nerds can help you understand more about saving and investing. To discover how different financial products could work for you, just head to the personal finance section on NerdWallet.com.
Sara Rathner:
Well, that was lovely and spoken like a true spokesperson.
Sean Pyles:
Gotta love the plug. She does that for a living. I also really like this idea of snow as a metaphor for saving and compounding. Not only is it accurate, it’s also very soothing.
Sara Rathner:
Well, I’m closing my eyes here in Virginia, waiting for maybe a snowfall this year that, within minutes, will turn all black and sooty, if we even get snow at all because last year we didn’t.
Sean Pyles:
I’m hoping we get at least a little bit here in the Pacific Northwest. And also, shoutout to Kim in Wisconsin.
All right, and that’s a wrap on our year-end special series for 2023, but never fear, we’ll be back next year. In the meantime, if you have a money question of your own, turn to the Nerds and call or text us your questions at 901-730-6373. That’s 901-730 N-E-R-D. You can also email us at [email protected]. Visit nerdwallet.com/podcast for more info on this episode, and remember to follow, rate and review us wherever you’re getting this podcast.
Sara Rathner:
This episode was produced by Tess Vigeland. Sean helps with editing. Kaely Monahan mixed our audio, and a big thank you to NerdWallet editors for all of their help.
Sean Pyles:
Here’s our brief disclaimer. We are not financial or investment advisors. This Nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances.
Sara Rathner:
With that said, until next time, turn to the Nerds, and Happy New Year.
An internshipship is an opportunity to work in a field that interests you, gain valuable work experience, enhance your college resume, and possibly even earn some extra money.
While internships are more commonly available to college students, it may be possible to get an internship when you’re still in high school.
Read on to learn more about high school internships, including how they work, their pros and cons, and how to find one.
What Is the Purpose of an Internship?
An internship is a temporary position that’s often related to a student’s academic field of study or career interests. It offers students a chance to apply lessons learned in the classroom in a professional setting, while also developing additional skills. Internships also give students an opportunity to make connections in their field of interest and determine if they want to pursue further study and a career in that area. Internships also give employers the opportunity to discover and develop future talent.
💡 Quick Tip: Some lenders help you pay down your student loans sooner with reward points you earn along the way.
The Duties of an Intern
The duties of an intern vary from job to job. For example, those interning at a doctor’s office might shadow medical professionals and take notes on patient visits. Those interning at a marketing firm might sit in on marketing meetings and assist in any communication needs.
An internship experience can be somewhat similar to an entry-level employee position. However, there is typically an educational component. The point is to learn more about the career path, not just get coffee or file the office mail (though you may be asked to do this, too).
Recommended: Is Getting A Degree In Marketing Worth It?
Pros and Cons of High School Internships
There are plenty of pros when it comes to getting internship experiences in high school. For one, an internship allows you to learn about a particular career path without having to commit to a lifelong job.
Learning about a path early on could help you determine whether you want to go to college (rather than directly enter the working world) and help you decide what you’d like to study in school.
Another pro of completing an internship in high school is gaining new experiences and skills. An internship allows you to learn from professionals and add relevant skills to your resume. This can give you a leg up in applying for jobs in the future.
And, of course, all this experience and new learning make for excellent items to add to any potential college applications. A potential downside to seeking an internship in high school is that they can be hard to find. In addition, the position may not be paid, and might be time-consuming, taking time away from other obligations like homework, studying for SATs, and applying to college.)
Recommended: What is the Hardest Year of High School?
Finding the Right Internship
Finding the perfect internship is a wholly personal experience. A good first step is to consider your interests in both the near and far term. By thinking about career paths you might be interested in, you might identify internship opportunities around you.
However, not every young person knows, or believes they know, exactly what they want to do in the future. But you may have a general interest. For example, if your favorite class is English, an internship at a local newspaper may make sense. If you’re interested in nature, an internship with a local parks and recreation group may make a good fit.
If you’re a high schooler, make a shortlist of interests and sit down with a parent or guardian to identify careers that may fit within these bounds.
Next, it’s time to identify a few companies you might be interested in interning with. Search around for companies near you that may be taking interns. From there, check out career pages on the individual companies to see if they have internship listings. If they don’t, try emailing the company to get in touch with the human resource (HR) department to see what may be available.
One quick tip: While researching and reaching out about internships, make sure to stay realistic about the time commitment. If an internship takes place during the school year, you may only be available in afternoons. Ensure the hiring manager knows the hours you’re available before committing to any long-term work.
Recommended: 10 Ways to Prepare for College
Resources to Find Internships in High School
While there isn’t any centralized listing location for internships for high school students, there are still plenty of places to find information on opportunities.
Schools: You can reach out to school resources like guidance counselors, principals, and individual teachers who may know of companies worth looking into.
Individual companies: Again, seek out information from company websites and reach out to human resource departments to see what may be available.
Job search websites: Check out job search websites, such as Linkedin and Indeed, and search for “Internships in [specific field here].” Make sure to search by location to ensure the internship is nearby.
Friends and family: This is the simplest tip — just ask around. Friends and family members are the ultimate social and work network. Make it known you’re looking for an internship and ask people for their advice on just where to look.
Recommended: College Planning Guide for High School Students
Questions to Ask Before Accepting an Internship
After figuring out your interests, asking your network, and finding an internship opportunity, you may think the work is done. However, there are still a few more questions to ask.
Before accepting an internship offer, make sure to ask about the full details. What are the hours? What can you expect to learn while on the job? What are the specific job duties and how will you be evaluated along the way? Will there be opportunities for mentorship? And finally, one of the most important questions: Is the internship paid?
💡 Quick Tip: It’s a good idea to understand the pros and cons of private student loans and federal student loans before committing to them.
Paid vs. Unpaid Internships
Scoring a paid internship isn’t a guarantee, but it’s not a completely far-fetched idea either. If a paid internship isn’t available, you can always ask about an exchange for class credit. Unpaid internships are a hotly contested issue so just make sure to do whatever feels right and comfortable for your situation.
Also keep in mind that even a paid internship likely won’t pay enough to make a major dent in your college expenses (though it can help).
If you’re concerned about how you and your family will pay for the cost of tuition, a good first step is to fill out the Free Application for Federal Student Aid (FAFSA) with your family. This will let you know if you are eligible for financial aid, including grants, scholarships, work-study, and federal student loans. If those do not cover your costs, you may also consider private student loans.
Private student loans are available through private lenders, including banks, credit unions, and online lenders. Rates and terms vary, depending on the lender. Generally, borrowers (or cosigners) who have strong credit qualify for the lowest rates.
Keep in mind, though, that private loans may not offer the borrower protections — like income-based repayment plans and deferment or forbearance — that automatically come with federal student loans.
If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.
Cover up to 100% of school-certified costs including tuition, books, supplies, room and board, and transportation with a private student loan from SoFi.
External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
SoFi Loan Products SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
SoFi Private Student Loans Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs.
SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Graduating high school and attending college are milestone achievements for students and their families. Getting to this stage requires hard work, financial planning, and communication between parents and their children.
If you’re hoping that your child will go to college after high school, talking about college well before they get to senior year can better prepare them for success.
There is no one-size-fits-all approach to getting ready for college, and the same goes for college conversation starters. Here are some tips and strategies to consider as you prepare to have the college talk with your child.
When is it too Early to Talk about College?
Putting off the college talk is generally a greater concern than starting too early. While kids are young, you can begin planting seeds in everyday conversation about college and careers. Consider taking a gradual approach. This can give your child time and space to come forward with their own thoughts to create a college conversation rather than a college lecture. 💡 Quick Tip: You can fund your education with a low-rate, no-fee private student loan that covers all school-certified costs.
When is it too Late to Talk about College?
There isn’t a definitive best time to start talking about college, but waiting too long could put your child at a disadvantage.
Many college admissions offices evaluate every year of high school to calculate a student’s grade point average (GPA) and academic performance. While junior year can be given greater weight, a bad grade in algebra as a freshman doesn’t disappear either. For this reason, the transition from middle school to high school can be an opportune time to begin talking about college.
While the academic side is important to emphasize, an overly direct approach could potentially stifle the college talk. Starting early can help you build a better foundation to discuss the more difficult and stressful parts of preparing for college.
Do Your Own Homework on the College Process
As a parent or guardian, doing some initial research can inform you on the nuts and bolts of the college process and show your child that you are supportive of their education. It’s no surprise that college is expensive, but there are options to make college more affordable.
First off, you may want to gauge how much financial aid your family could qualify for with the government’s Federal Student Aid Estimator . This tool provides a free estimate of federal aid eligibility, including work-study, grants, and federal student loans.
There has been a growing call for waiving standardized tests for college admission, but most schools still require SAT or ACT scores for admission. Not every family is in the position to pay for tutors and prep classes, but it is worth noting that students can take these tests multiple times to improve their scores.
Through a process called “superscoring,” some colleges accept a student’s best section-level scores for math and evidence-based reading, even if they are from different test dates.
Some other useful tidbits to be aware of as you start the college conversation include:
• College application fees: The cost varies by institution. The average application fee runs around $45, though some schools charge as much as $100 to apply. However, applicants could qualify for a waiver if they meet certain criteria for financial need. • In-state vs. out-of-state tuition cost: Each state has its own public university system that is partially funded by taxpayer money. Therefore, the base tuition cost for in-state residents is less than out-of-state students, though this does not account for potential scholarships and financial aid. Students attending out-of-state public universities typically pay more for tuition than in-state residents, though the cost may still be less than attending a private college. • Local scholarship opportunities: Community organizations, nonprofits, and businesses may offer scholarships specifically to graduates of your child’s high school or within your community. Criteria varies, but common elements might include academic merit, leadership, and financial need.
Now let’s move on to some helpful college conversation starters.
We are here to help you pay for school
Asking About Their Goals, Dreams, and Worries
Adolescence is a journey in self-discovery, but also insecurity and social pressure. In addition to your child’s future aspirations, acknowledge that they may have doubts and worries about attending college or moving away from home. Simply listening and showing your support is a good start to moving forward with the college talk.
On a lighter note, your child doesn’t need to have it all figured out by the time they decide to enroll in college. Some students do not declare a major until a few semesters into college. This means they can take a variety of classes before making a final decision for their degree.
Still, there are hundreds of college majors to consider, and not all colleges have the same offerings, so narrowing it down a little beforehand can help your child find a college that fits their needs and graduate on time.
Attending a local college with friends may be really important to your child, or they may be dead set on a specialized subject only offered at a handful of colleges. Either way, there is still plenty to discuss for their future plans.
Recommended: College vs University: What’s the Difference?
Attending College and Career Events Together
Many high schools host career and college fairs throughout the academic year. Often, these events are marketed towards juniors and seniors who are approaching application deadlines and graduation. If your student is a freshman or sophomore in high school, these fairs can provide a convenient opportunity to start browsing their options without the pressure of applying yet.
Having the confidence to speak with college admissions recruiters at these events is not only great practice, but can gain application fee waivers and insight into scholarships and other opportunities.
Similarly, colleges organize open house events and tours for prospective students and their families throughout the year. Starting with an unofficial tour of a nearby college campus can be a low-stakes introduction.
Incorporating college visits and tours into a family vacation is another way to test the waters of living and studying away from home.
Recommended: College Planning Guide for Parents of High School Students
Sharing Your Own Experiences
Sharing personal experiences from college can be a natural way to broach the subject, as well as connect with your child on a more peer-to-peer level.
Your child may be surprised to learn which friends you made in college that they’ve known since birth. There are a lot of practical and logistical topics to cover during the college conversation, so this is a chance to bond over more personal stories.
If you didn’t have the opportunity to attend college, that’s okay too. Letting your child know that college is a possibility for them is what matters.
Asking friends who attended college or whose children are in college for advice could offer some insight.
Also, inviting a trusted family member or friend to join the college talk with you and your child is another way to continue the conversation in a caring environment. If your child will be a first-generation college student, keep in mind that they may be eligible for specific types of programs and scholarships.
Letting Them Know Your Financial Plan
Your child may be more intuitive than you think. If you haven’t brought up the matter of paying for college yet, they may assume their education options are more limited than the reality.
Talking about money with your children may feel awkward, but college isn’t cheap, and paying for it is a critical piece of the equation for selecting a school that is right for them.
You don’t have to get too deep in the weeds, but discussing payment options can help put your child at ease. Fortunately, there are several ways to pay for college, such as scholarships, grants, and student loans.
Grants and scholarships generally do not require repayment and are used for education and associated expenses. Both can be awarded through financial aid packages or nonprofit and community organizations.
Additionally, scholarships can be awarded by colleges directly or through a competitive application process. Learning about these opportunities early on could better prepare your child for receiving scholarships and grants.
When approaching student loans, an important piece to convey to your child is the impact of interest. With an unsubsidized federal student loan, interest starts to accrue when the loan is disbursed, and continues accruing until the loan is paid back.
With subsidized federal student loans, the interest is covered by the government while the student is in school at least half time and through a six-month grace period after the student leaves school. With either type of federal loan, you don’t need to begin repayment until six months after graduation.
Generally, interest will also start accruing immediately with private student loans. However, the terms on private student loans vary by lender, so confirm with the loan servicer to be sure. Some private lenders also allow students to defer making any payments until six months after graduation.
Paying off loans ahead of schedule could result in a lower total repayment amount, but consult with your loan provider to be sure. For more information, take a look at this primer on student loans.
This can also be the time to have a candid conversation about getting a summer job and pitching in to save for college. 💡 Quick Tip: Federal student loans carry an origination or processing fee (1.057% for Direct Subsididized and Unsubsidized loans first disbursed from Oct. 1, 2020, through Oct. 1, 2024). The fee is subtracted from your loan amount, which is why the amount disbursed is less than the amount you borrowed. That said, some private student loan lenders don’t charge an origination fee.
Paying for College
Federal student loans, scholarships, grants, and work-study programs may be sufficient to fund all or at least a portion of your child’s education.
However, some students take out private student loans to pay for their education and associated living expenses, when federal aid and savings aren’t enough to cover the costs.
Alternatively, college parents can borrow loans to support their child’s education expenses. The federal government’s PLUS loans program for parents is one option to consider. Private lenders also offer parent student loans with potentially lower interest rates.
If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.
Cover up to 100% of school-certified costs including tuition, books, supplies, room and board, and transportation with a private student loan from SoFi.
SoFi Loan Products SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
SoFi Private Student Loans Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs.
SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Robo-advisors have barely been around for 10 years, but in the past couple of years several have been steadily expanding their investment menus, and even offering valuable add-on services. One of the leaders in this regard is Wealthfront. The robo-advisor has been growing its investment capability in every direction but is now even offering financial planning. The platform now bills itself as offering High-Interest Cash, Financial Planning & Robo-Investing for Millennials. If you’re looking for more than just investing, Wealthfront has it. And as has become their trademark, it’s all available at a low cost.
What is Wealthfront?
Based in Palo Alto, California, and founded in 2011, Wealthfront has about $25 billion in assets under management. It’s the second-largest independent robo-advisor, after Betterment. And while dozens of robo-advisors have arrived in recent years, Wealthfront stands out as one of the very best. There isn’t any one thing Wealthfront does especially well, but many. And they’re adding to their menu of services all the time.
Their primary business of course is automated online investing. You can open an account with as little as $500, and the platform will design a portfolio for you, then manage it continuously. Your money will be invested in a globally diversified portfolio of ETFs–just like most other robo-advisors. But Wealthfront takes it a step further, and also adds real estate and natural resources.
Like other robo-advisors, Wealthfront uses Modern Portfolio Theory (MPT) in the creation of portfolios. They first determine your investment goals, time horizon, and risk tolerance, then build a portfolio designed to work within those parameters. MPT emphasizes proper asset allocation to both maximize returns, and minimize losses.
But in a major departure from other robo-advisors, Wealthfront now offers the ability to customize your portfolio and get access to a variety of investment methodologies and portfolios, including Smart Beta, Risk Parity and Stock-Level Tax-Loss Harvesting. And more recently, they’ve also stepped into the financial planning arena. They now offer several financial planning packages, customized to very specific needs, including retirement planning and college planning.
If you haven’t checked out Wealthfront in the past year or so, you definitely need to give it a second look. This is a robo-advisor platform where things are happening–fast!
How Wealthfront Works
When you sign up with Wealthfront, they first have you complete a questionnaire. Your answers will determine your investment goals, time horizon, and risk tolerance. A portfolio invested in multiple asset classes will be constructed, with an exchange-traded fund (ETF) representing each.
The advantage of ETFs is that they are low-cost, and enable the platform to expose your portfolio to literally hundreds of different companies in each asset class. With your portfolio invested in multiple asset classes, it will literally contain the stocks and bonds of thousands of companies and institutions, both here in the U.S. and abroad.
Wealthfront offers tax-loss harvesting on all portfolio levels. But they’ve also added portfolio options for larger investors, that include stocks as well as ETFs. The inclusion of stocks gives Wealthfront the ability to be more precise and aggressive with tax-loss harvesting.
Each portfolio also comes with periodic rebalancing, to maintain target asset allocations, as well as automatic dividend reinvestment. As is typical with robo-advisors, all you need to do is fund your account–Wealthfront handles 100% of the investment management for you.
More recently, Wealthfront has also added external account support. The platform can now incorporate investment accounts that are not directly managed by the robo-advisor. This will provide a high-altitude view of your entire financial situation, helping you explore what’s possible and providing guidance to optimize your finances.
And much like many large investment brokers, Wealthfront now offers a portfolio line of credit. It’s available only to investors with $25,000 or more in a taxable account, but if you qualify you can borrow money against your investment account and set your own repayment terms in the process
Wealthfront Features and Benefits
Minimum initial investment: $500
Account types offered: Individual and joint taxable accounts; traditional, Roth, rollover and SEP IRAs; trusts and 529 college accounts
Account access: Available in web and mobile apps. Compatible with Android devices (5.0 and up), and available for download at Google Play. Also compatible with iOS (11.0 and later) devices at The App Store. Compatible with iPhone, iPad and iPod touch devices.
Account custodian: Account funds are held in a brokerage account in your name through Wealthfront Brokerage Corporation, which has partnered with RBC Correspondent Services for clearing functions, such as trade settlement. IRA accounts are held with Forge Trust.
Customer service: Available by phone and email, Monday through Friday, from 7:00 AM to 5:00 PM, Pacific time.
Wealthfront security: Your funds invested with Wealthfront are covered by SIPC, which insures your account against broker failure for up to $500,000 in cash and securities, including up to $250,000 in cash.
Wealthfront uses third-party providers to maintain secure, read-only links to your account. The providers specialize in tracking financial data, as well as employ robust, bank-grade security, and in general, they follow data protection best practices. In addition, Wealthfront does not store your account password.
Wealthfront Investment Methodology
For regular investment accounts, Wealthfront constructs portfolios from a combination of 10 different specific asset classes. This includes four stock funds, four bond funds, a real estate fund, and a natural resources fund.
Each portfolio will contain various allocations of each asset class, based on your investor profile as determined by your answers to the questionnaire. The one exception is municipal bonds. That allocation will appear only in taxable accounts. IRAs don’t include them since the accounts are already tax-sheltered.
Notice in the table below that most asset classes have two ETFs listed. This is part of Wealthfront’s tax-loss harvesting strategy. In each case, the two ETFs are very similar. To facilitate tax-loss harvesting, one fund position will be sold, then the second will be purchased at least 30 days later, to restore the asset class. (We’ll cover tax-loss harvesting in a bit more detail a little further down.)
The ETFs used for each asset class are as follows, as of December 29, 2018:
Specific Asset ClassGeneral Asset ClassPrimary ETFSecondary ETF
US Stocks
Stocks
Vanguard CRSP US Total Market Index (VTI)
Schwab DJ Broad US Market (SCHB)
Foreign Stocks
Stocks
Vanguard FTSE Developed All Cap ex-US Index (VEA)
Schwab FTSE Dev ex-US (SCHF)
Emerging Markets
Stocks
Vanguard FTSE Emerging Markets All Cap China A Inclusion Index (VWO)
iShares MSCI EM (IEMG)
Real Estate
Real Estate
Vanguard MSCI US REIT (VNQ)
Schwab DJ REIT (SCHH)
Natural Resources
Natural Resources
State Street S&P Energy Select Sector Index (XLE)
Vanguard MSCI Energy (VDE)
US Government Bonds
Bonds
Vanguard Barclays Aggregate Bonds (BND)
Vanguard Barclays 5-10 Gov/Credit (BIV)
TIPS
Bonds
Schwab Barclays Capital US TIPS (SCHP)
Vanguard Barclays Capital US TIPS 0-5 Years (VTIP)
Municipal Bonds (taxable accounts only)
Bonds
Vanguard S&P National Municipal (VTEB)
State Street Barclays Capital Municipal (TFI)
Dividend Stocks
Bonds
Vanguard Dividend Achievers Select (VIG)
Schwab Dow Jones US Dividend 100 (SCHD)
Wealthfront’s historical returns are as follows (through 1/31/2019). But keep in mind these numbers are general. Since the portfolios designed for each investor are unique, your returns will vary.
Specialized Wealthfront Portfolios
As mentioned in the introduction, Wealthfront has rolled out several different investment options, in addition to its regular robo-advisor portfolios. Each represents a specific, and generally more specialized investment strategy, and is typically available to those with larger investment accounts.
Smart Beta: You’ll need at least $500,000 to be eligible for this portfolio. Smart beta departs from traditional index-based investing, which relies on market capitalization. For example, since Apple is one of the most highly capitalized S&P 500 stocks, it has a disproportionate weight in strict S&P 500 index funds. In a smart beta portfolio, the position in Apple will be reduced based on other factors.
In general, under smart beta, the weighing of stocks in the fund uses a variety of factors that are less dependent on market capitalization. There’s some evidence this investment methodology produces higher returns. This portfolio is available at no additional fee.
Wealthfront Risk Parity Fund: This is actually a mutual fund–the first offered by Wealthfront. It involves the use of leverage with some positions within the portfolio. It attempts to achieve higher long-term returns by equalizing the risk contributions of each asset class. It’s based on the Bridgewater Hedge Fund, and requires a minimum of $100,000, with an additional annual fee of 0.25% (0.50% total). This is the only Wealthfront portfolio that charges a fee over and above the regular advisory fee.
Socially responsible investing (SRI): Wealthfront just recently began to offer a specific SRI portfolio option. Once you sign up, you’ll be able to customize your portfolio and add socially responsible ETFs.
Sector-specific ETFs: If you want to invest in a particular portion of the market, such as technology or healthcare, Wealthfront gives you the option to build a portfolio that focuses on certain industries to portions of the stock market.
Customized Wealthfront Portfolios:
Wealthfront also lets investors build their own portfolios, which is somewhat uncommon among robo-advisors.
Most robo-advisors will build your portfolio automatically based on your risk tolerance and goals. If you like that service, Wealthfront can do it. However, more hands-on investors are free to make tweaks to the automatically designed portfolio by adding or removing ETFs.
You can also build a portfolio entirely from scratch if you’d rather. You can choose which ETFs to invest in and how much you want to invest in them. You can then let Wealthfront handle things like rebalancing and tax-loss harvesting while maintaining the portfolio you desire.
Wealthfront Tax-loss Harvesting
If there’s one investment category where Wealthfront stands above other robo-advisors, it’s tax-loss harvesting. Not only do they offer it on all regular taxable accounts (but not IRAs, since they’re already tax-sheltered), but they also offer specialized portfolios that take it to an even higher degree.
Wealthfront starts with a tax location strategy. That involves holding interest and dividend-earning asset classes in IRA accounts, where the predictable returns will be sheltered from income tax. Capital appreciation assets, like stocks, are held in taxable accounts, where they can get the benefit of lower long-term capital gains tax rates.
But for larger portfolios, Wealthfront offers Stock-level Tax-Loss Harvesting. Three specialized portfolios are available, using a mix of both ETFs and individual stocks. The purpose of the stocks is to provide more specific tax-loss harvesting opportunities. For example, it may be more advantageous to sell a handful of stocks to generate tax losses, than to close out an entire ETF.
Given that Wealthfront puts such heavy emphasis on tax-loss harvesting, it’s not surprising they’ve published one of the most respected white papers on the subject on the internet. If you want to know more about this topic, it’s well worth a read. The paper concludes that tax-loss harvesting can significantly increase the return on investment of a typical portfolio.
US Direct Indexing
US Direct Indexing is an enhanced level of tax-loss harvesting that Wealthfront offers to people with account balances exceeding $100,000.
Instead of building a portfolio of ETFs, Wealthfront will use your money to directly purchase shares in 100, 500, or 1,000 US companies. By buying shares in so many companies, Wealthfront can emulate an index fund in your portfolio while owning individual shares in the businesses.
Owning individual shares in hundreds of companies makes tax-loss harvesting easier as it lets Wealthfront’s algorithm trade based on movements in individual stocks rather than in funds. This can increase the number of tax losses that Wealthfront harvests each year, reducing your income tax bill.
Other Wealthfront Features
Wealthfront Cash Account
Wealthfront offers acash account where you can safely and securely store your money for anything–emergencies, a down payment for a home, or to later invest. By working with what they call Program Banks, Wealthfront has quadrupled the normal FDIC insurance on this account, so you’re protected for up to $5 million.
There’s also no market risk since it’s not an investment account and the money isn’t being invested anywhere. You can make as many transfers in and out of the account as you’d like, and it only takes $1 to start.
So what’s the catch?
There really isn’t one. Wealthfront will skim a little off the top to make some money before giving you an industry-leading 4.30% APY, but other than that, you’re just giving them more financial data. Since we’re doing this all the time with technology anyway, it shouldn’t make that big of a difference.
I see no downside, especially if you’re already a client of Wealthfront.
They’re really making a play to be your all-in-one financial services provider, too.
A new feature, just launched, is the ability to use your cash account as a checking account. This includes the ability to access your paycheck up to two days early when you set up a direct deposit. Additionally, you can invest in the market within minutes using your Wealthfront Cash account. Put the two together and you give yourself the ability to invest more than 100 days more in the market. The account also allows you to auto-pay bills and use apps like Venmo and PayPal to send money to friends or family. Account-holders also get a debit card to make purchases and get cash from ATMs. And you can use the account to organize your cash into savings buckets – like an emergency fund, down payment on a house, or other large purchase – and use Wealthfront’s Self-Driving Money offering to automate your savings into those buckets.
If you have cash that’s getting rusty in a traditional bank account and you want to earn more, the Wealthfront Cash Accountis a great place to keep it.
Read more about the cash account in our Wealthfront Cash Account full review.
Wealthfront Portfolio Line of Credit
This feature is available if you have at least $25,000 in your Wealthfront account. It allows you to borrow up to 30% of your account value, and currently charges interest rates between 3.15% and 4.40% APR depending on account size. You can make repayments on your own timetable, since you’re essentially borrowing from yourself. And since the credit line is secured by your account, you don’t need to credit qualify to access it.
Wealthfront Free Financial Planning
This is Wealthfront’s entry into financial planning. But like everything else with Wealthfront, this is an automated service. There are no in-person meetings or phone calls with a certified financial planner. Instead, technology is used to help you explore your financial goals, and to provide guidance to help you reach them. And since the service is technology-based, there is no fee for using it.
The service can be used to help you plan for homeownership, college, early retirement, or even to help you plan to take some time off to travel, like an entire year!
Simply choose your financial objective, enter your financial information, and Wealthfront will direct you on how to plan and prepare.
Self-Driving Money
One of the biggest and largely unrecognized obstacles for most investors is something known as cash drag. That’s when you have too much of your portfolio sitting in cash, which may earn interest, but it doesn’t provide the investment returns you can get in a diversified investment portfolio.
Wealthfront has addressed the cash drag dilemma with their newly released Self-Driving Money features. It’s a free service offered by the robo-advisor that essentially automates your savings strategy. It does this by automatically moving excess cash to help meet your goals, including into investment accounts where it will earn higher returns. And in the process, it eliminates the need to make manual cash transfers, and the judgment needed to decide exactly when to make that happen.
Our vision of Self-Driving Money is going to be a complete game-changer for people’s finances, said Chris Hutchins, Head of Financial Automation at Wealthfront. We want to completely remove the burden of managing your money so you can focus on your career, your family or whatever is most important to you.
You can take advantage of Self-Driving Money from the Wealthfront Cash Account. You’ll set a maximum balance for the connected account, which should be an amount that’s more than you expect to spend or withdraw on a monthly basis.
How It Works
When Wealthfront determines you’re over your maximum balance by at least $100 it will schedule an automatic transfer of the excess cash based on your goals. For example, you can tell Wealthfront you want to save $10,000 in an emergency fund, then max out your Roth IRA, then put the rest toward saving for a down payment on a house. Once you set the strategy, Wealthfront will automate the rest.
And before it happens, you’ll receive an email alert, then always have 24 hours to cancel the transfer if you need to cover unexpected expenses. You’ll also be able to turn on and off your Self-Driving Money plan at any time.
It’s usually possible to set up automated transfers from external accounts into most investment accounts. But what sets Wealthfront apart is the fact that it will make those transfers automatically. They will make sure you always have enough cash to pay your bills, then automatically transfer any excess into your savings buckets or investment accounts to improve the return on your money.
The strategy is designed to optimize your money across spending, savings, and investments, and to make it all flow with no effort on your part. You can simply have your paycheck direct deposited into your external checking account or Wealthfront Cash Account, cover your expected monthly spending, then have excess funds automatically transferred into the Wealthfront account of your choice.
By delivering on its Self-Driving Money vision, Wealthfront is taking the robo-advisor concept to a whole new level. Not only do you not need to concern yourself with managing your investments, but now even funding those investments will happen automatically. The result will be near complete freedom from the financial stresses that plague so many individuals.
Wealthfront Fees
Wealthfront has a single fee structure of just 0.25% per year for their advisory fee. That means you can have a $100,000 portfolio managed for just $250, or only a little bit more than $20 per month.
The one exception is the Wealthfront Risk Parity Fund, which has a total fee of 0.50% per year.
How to Sign Up with Wealthfront
To open an account with Wealthfront, you’ll need to be at least 18 years old, and a U.S. citizen.
You’ll need to provide the following information:
Your name
Address
Email address
Social Security number
Date of birth
Citizenship/residency status
Employment status
As is the case with all investment accounts, you’ll also be required to supply documentation verifying your identity. This is usually accomplished by supplying a driver’s license or other state-issued identification.
As mentioned earlier, you complete a questionnaire that will be used to determine your investment goals, time horizon, and risk tolerance. Your portfolio will be based on your answers to that questionnaire, and will be presented to you upon completion of the questionnaire.
For funding, you can use ACH transfers from a linked bank account. You will also have the option to schedule recurring deposits, on a weekly, biweekly, or monthly basis. The platform can even enable you to set up dollar-cost averaging deposits.
If you already have a brokerage account with another company, Wealthfront makes it easy to transfer your funds to your new account. If you’re invested in ETFs that Wealthfront supports, Wealthfront will assist with an in-kind transfer.
That means that you won’t have to sell your shares before transferring funds, which lets you avoid capital gains taxes that would be triggered by a sale.
Wealthfront Alternatives
Wealthfront’s closest competitor, and the robo-advisor that offers the most comparable services, is Betterment. They also have an annual advisory fee of 0.25%, but require no minimum initial investment. That could make it the perfect robo-advisor for someone with no money, who plans to fund their account with monthly deposits. Read the full Betterment review here.
Related: Wealthfront vs. Betterment
Another alternative is M1. Also a robo-advisor, M1 enables you to invest your money in what they call “pies”. These are miniature investment portfolios comprised of both stocks and ETFs. You can invest in existing pies, or create and populate pies of your own design. Once you invest in one or more pies, the platform will automatically manage it going forward. What’s more, M1 is free to use. Read more about M1 here.
Related: Wealthfront vs. Vanguard
Read More: The Best Robo Advisors – Find out which one matches your investment needs.
Wealthfront Pros and Cons
Investment options: Wealthfront offers more investment options than just about any other robo-advisor, particularly for investors with at least $100,000.
Reasonably priced: The annual fee of 0.25% is extremely reasonable, especially when you consider the degree of sophistication offered by Wealthfront’s investment methodology.
Tax-loss harvesting: This is available on all accounts, and Wealthfront is probably better at this investment strategy than any other robo-advisor.
Portfolio credit line: Gives you the ability to borrow against your portfolio with ease, and represents a form of margin investing.
Financial planning feature: The financial planning service is free to use and is available to all investors.
Limited access for smaller investors: Some of the more advanced investment portfolios and services are available only to investors with $100,000 or more to invest.
$500 minimum initial investment: It’s a minor issue, though some competitors require no funds to open an account.
FAQs
[faqs-content id=”MXKBSNXLNBBI5PDCYD4XJTU4PM” /]
Should You Sign Up for Wealthfront?
In a word, absolutely! Wealthfront is one of the very top robo-advisors, and you can’t go wrong with this one. Not only do they offer far more services than most other robo-advisors, but they also allow you to grow along the way. For example, as your account increases in value, you can take advantage of more sophisticated investment strategies, including advanced tax-loss harvesting.
That Wealthfront offers its portfolio line of credit and free financial planning services only makes the platform a bit more attractive, But the real benefit is the actual investment service. Wealthfront’s investment service comes extremely close to that of traditional human investment advisors, but at only a fraction of the annual cost.
The process of getting into college actually starts long before you fill out your first application. In fact, soon after you start high school, it can be a good idea to start laying the groundwork for college, from choosing the right classes to thinking about where you might like to go to figuring out how you’re going to cover the cost.
What follows is a simple five-step, pre-college plan that can help you find, get into, and pay for your dream school.
Preparing For College: A 5-Part Checklist
For many things in life, preparation is the key to success. And this is certainly true when it comes to getting into college. Here are five steps that can help you set yourself up for a successful college experience.
1. Research Your Dream School
One of the first parts of preparing for college is deciding which college or university is right for you. The good news is that there is a school out there for just about everyone. The bad news is that you have so many options that you might be overwhelmed with choices.
Some students know right away that they want to go to the same school their parents went to, while others may be limited to choosing between a few in-state campuses. Regardless of your position, there are some questions you can ask yourself to help narrow down your college search:
What Type of Career Do You Want to Pursue?
One of the first things you might consider is what you hope to do with your degree. If you already know that you want to be an urban planner, then you may want to focus your college search on schools with stellar urban planning programs. Think your dream is too niche?
Whether you want to study auctioneering or Egyptology, there’s likely a program for you. If, on the other hand, you aren’t sure what you want to major in, you may want to look at bigger schools with many different programs where you will be able to take a wide variety of classes. 💡 Quick Tip: When shopping for a private student loan lender, look for benefits that help lower your monthly payment.
Where Do You Want to be Located?
You may also want to consider what type of location you’re looking for in a college experience. Maybe you want to get as far away from home as possible, or maybe you would be more comfortable on a campus within driving distance of your family. Some students choose to live at home and attend a local college in order to save money on living costs. Once you narrow down a location, you can start searching for schools in that area.
Recommended: Should I Go to Community College?
How Many Schools Will You Apply To?
It’s not a bad idea to apply to multiple schools even if you have your heart set on just one. Your dreams and goals can change through the college application process, and a different school may be a better match when it comes time to make a final decision. Plus, the application process can be competitive, and applying to more schools may give you more chance of success in your application.
Recommended: College vs University: What’s the Difference?
2. Plan For the SAT and ACT
Once you know where you want to apply, it is time to get down to business and start preparing for college entrance exams. Some schools require the Scholastic Aptitude Test, known as the SAT, and some schools require American College Testing, known as the ACT. Many schools will accept either one.
The key to working towards a killer score on either test is preparation, preparation, preparation. Whether you’re taking an after-school prep class or studying by yourself, there are lots of resources available online to help you succeed. Both the SAT and the ACT offer free practice tests, and Khan Academy offers a free SAT practice program .
Taking practice tests can help you not only learn the material but can help you get comfortable with the format of the test. This can help you stay calm and confident when test day rolls around.
Recommended: Do Your SAT Scores Really Matter for College?
3. Get Involved In Extracurriculars
In between all that studying, you may want to consider taking some time to get to work in your community. One thing many colleges look for are multi-faceted students who are interested in more than just academics.
That means that getting involved in the community could potentially help you write a strong college application, and it may also help you decide what you want to do with your life. Sports obsessed? You might consider taking up a new sport to round out your classes or volunteering to coach a local youth team.
More into classic literature than shooting hoops? Many schools have programs where you can volunteer to tutor younger students, which can not only help sharpen your skills, but may look great on an application. Whatever you’re into, don’t be afraid to branch out and try something new — you might discover you have a passion for marine biology after organizing a beach clean up day with your classmates.
Recommended: College Planning Checklist for Parents
4. Consider Taking AP Courses
Many schools offer Advanced Placement or “AP” courses. Taking these classes may help you get one step ahead when it comes to college. AP courses allow you to tackle college-level material while you’re still in high school, and at the end of the class (if you pass the AP exam), you could be rewarded with college credits. Why try to rack up college credits in high school?
The more credits you earn from AP classes in high school, the more intro classes you may be able to skip in college. So if you take AP English in high school, you may qualify to skip out on the freshman level English class once you’re at school.
Depending on the school, that may mean that you have more opportunity to take specialized classes in your major, or it could even lead to the opportunity to graduate early.
5. Figure Out Your Finances
There’s no denying that college can be expensive. For the 2022-2023 academic year, the average tuition at a public college was $11,744 for state residents and $21,928 for out-of-state students. The average tuition and fees for a private college was $27,796. Keep in mind: These numbers don’t include the cost of housing, food, text books and supplies.
According to the Sallie Mae How America Pays for College 2023 , parent income and savings covered 50% of college costs. So, even if you’ll get some help from your family, you may need more funding to cover some of the cost of college. Fortunately, there are many ways to finance your education.
A good place to start is by filling out the Free Application for Federal Student Aid (FAFSA), which will let you know if you are eligible for financial aid, including grants, scholarships, work study, and federal student loans. If those do not cover your costs, you may also consider private student loans.
Private student loans are available through private lenders, including banks, credit unions, and online lenders. Rates and terms vary, depending on the lender. Generally, borrowers (or cosigners) who have strong credit qualify for the lowest rates.
Keep in mind, though, that private loans may not offer the borrower protections — like income-based repayment plans and deferment or forbearance — that automatically come with federal student loans. But if you are looking for supplemental funding for your education, private student loans are an option. 💡 Quick Tip: Parents and sponsors with strong credit and income may find much lower rates on no-fee private parent student loans than federal parent PLUS loans. Federal PLUS loans also come with an origination fee.
The Takeaway
The college application process can be overwhelming. Breaking it down into smaller steps and goals can make it feel a little bit easier. Consider researching schools, making a plan for standardized testing, expanding your involvement in extracurriculars, and taking AP level courses. Getting into college is half the equation, however — the other half is paying for it.
When federal financial aid, scholarships, grants, and savings aren’t enough -– student loans may be one option to consider to help fill in the gaps.
If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.
Cover up to 100% of school-certified costs including tuition, books, supplies, room and board, and transportation with a private student loan from SoFi.
SoFi Loan Products SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
SoFi Private Student Loans Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs.
SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.
External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
When college freshmen step foot on campus, they may go to an activity fair and see members of sororities and fraternities encouraging recruits to join. They might want to know that becoming part of Greek life can have its upsides and downsides.
Whether or not students decide to let their Greek flag fly depends on their personality, their specific situation, and their goals while they are in school. Some may find Greek life incredibly enriching, and others could decide it’s a waste of their time.
Here’s a look at what Greek life is like and pros and cons you may want to consider when deciding if joining a fraternity or sorority is right for you.
What Is Greek Life in College?
Greek life is made up of communities of students who live together, volunteer for different organizations, pursue networking opportunities, and much more. The communities consist of sororities for women and fraternities for men.
Sororities and fraternities may have various objectives, but overall they exist so that students can make meaningful connections with one another, develop leadership skills, and give back.
Roughly 15% of men join fraternities at U.S. colleges, while about 18% of women join sororities.
Students who are interested in becoming members must apply and then go through an initiation process. Once accepted, they will live with their sorority or fraternity, usually in a house on campus, and participate in activities like sports, dances, parties, and community service opportunities.
Sorority and fraternity names consist of two or three Greek letters, like Phi Kappa Theta, Sigma Pi, or Delta Zeta, a nod to the first U.S. Greek letter society, Phi Beta Kappa, founded in 1776 at the College of William and Mary as a literary, debating, and social club.
Many students only know about sororities and fraternities from pop culture references like “Revenge of the Nerds,” “Animal House,” “Legally Blonde,” and “Old School,” which depict a perennial party.
While that is certainly true in some instances — and fraternities have come under fire for their alcohol use and hazing rituals — Greek life can be much more meaningful and beneficial than these portrayals. 💡 Quick Tip: SoFi offers low fixed- or variable-interest rates. So you can get a private student loan that fits your budget.
Upsides of Greek Life
Joining a fraternity or sorority comes with a number of advantages. Here’s a look at some of the perks.
Friends
When new students first get to college, they may not know where to turn to make connections. If they become part of a sorority or fraternity, they could make many new friends right away, bond with them through different activities and social events, and remain friends for life.
Networking Opportunities
Students will also have the chance to network with their new peers. When they’re searching for internships or jobs, these connections can prove to be highly valuable.
Plus, if a job hunter lists their sorority or fraternity on a resume and a recruiter is a Greek life alumnus, that could open up a conversation and make a candidate stand out.
Recommended: 3 Summer Jobs Ideas for College Students
Possibly Cheaper Housing
Living in college dorms can be pricey. If students are sharing a house with many members of a sorority or fraternity, they could potentially save money.
They may also save money by having access to a full kitchen, where they can make meals instead of purchasing a meal plan or eating at restaurants all the time.
Recommended: 20 Ways to Save Money in College
Development of Leadership Skills
Sororities and fraternities need leaders who will come up with ideas for activities, pilot volunteering efforts, and recruit members.
If members step up and decide they want to become leaders, then they are taking on new responsibilities and developing crucial skills that will be valuable when they graduate from college and start to look for jobs.
Volunteering Opportunities
Fraternities and sororities are often focused on philanthropy.
Students can participate in different volunteer projects with their fellow Greek life members and contribute to making the world a better place.
Not to mention, this will look good on a resume because it shows that a student is passionate about certain causes and wants to do their part to improve the lives of others.
Recommended: College Freshman Checklist for the Upcoming School Year
Potential Downsides of Greek Life
Like a toga, Greek life isn’t a good look for everyone. Here are some possible cons.
Cost
You typically need to pay membership dues each year you are a member of a fraternity or sorority. The cost varies depending on the school and fraternity/sorority you join but, on average, you can expect to pay around $2,000 to $3,0000 for the first year.
Local and national chapter fees are not always covered in the regular monthly dues.
And if fraternities or sororities get into trouble, members could be fined as well.
Recommended: What Is the Cost of Attendance in College?
Reputation
Fraternities and sororities have gotten a bad rap from movies and TV.
Worse, students have died in hazing accidents throughout the years, leading colleges to take administrative action against fraternities especially.
Some fraternities and sororities do emphasize parties and drinking, which is all fun and games until someone begins to flunk out, becomes addicted, is involved in an assault, or is injured.
It’s best, of course, to socialize responsibly and always make academic studies the priority.
Time Commitment
Because Greek life involves so many events, and members are expected to participate, joining a sorority or fraternity means a huge time commitment.
Spending too much time on Greek life activities and not enough on studying or working at internships could have a negative impact on a student’s future.
Recommended: College Planning Guide for High School Students
Determining Whether or Not to Join Greek Life
Joining a fraternity or a sorority can be a great decision, especially for freshmen who may not know anyone on campus. If they are a part of Greek life, then they will stay busy, make friends, network, and contribute.
On the flipside, if they are in a campus family that is constantly throwing parties and not interested in enriching members’ lives in a meaningful way, then joining might not be a good idea.
If you’re concerned about being able to afford the cost of joining a fraternity or sorority, keep in mind that there are a number of ways to cover the cost of college tuition and living expenses, including grants, scholarships, subsidized and unsubsidized federal student loans, and private student loans. 💡 Quick Tip: It’s a good idea to understand the pros and cons of private student loans and federal student loans before committing to them.
The Takeaway
A sorority or fraternity can provide camaraderie and enduring connections, and enhance a call for service and leadership. It can also be time consuming, expensive, and distracting. Greek life isn’t for everyone, but some will find it a life-changing college choice.
If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.
Cover up to 100% of school-certified costs including tuition, books, supplies, room and board, and transportation with a private student loan from SoFi.
SoFi Loan Products SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
SoFi Private Student Loans Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs.
SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.
External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Opening a 529 plan is a tax-advantaged way to set aside money for college. The money you contribute can grow tax-deferred and qualified withdrawals are tax-free. While there is no federal tax break for making 529 plan contributions, you may be able to claim one at the state level. Breaking down the 529 tax deduction by state can give you an idea of how you might be able to benefit when saving for college. Need help creating a college savings plan? Get connected with a financial advisor near you to learn more.
Understanding 529 Plan Tax Deductions
Tax deductions are amounts that reduce your taxable income for the year. You can claim both federal and state tax deductions. They’re different from tax credits, which reduce your tax liability on a dollar-for-dollar basis.
Claiming tax deductions can help you to pay less in taxes or garner a bigger refund if you typically get money back at the state or federal level. Some deductions are above-the-line, while others require you to itemize on your tax return. Credits, meanwhile, lower your tax bill.
The federal government offers some tax deductions for education, but a deduction for 529 plan contributions isn’t one of them. You can, however, deduct interest paid to student loans. The American Opportunity Tax Credit and the Lifetime Learning Tax Credit can also be claimed to offset higher education expenses.
529 Tax Deduction by State
Every state offers at least one 529 plan, but states are not required to offer a tax deduction or other tax breaks for education. That being said, a number of states do offer deductions if you’re making contributions to a 529 plan. States can also offer credits or other tax breaks as an incentive to save for college.
Nine states do not have income tax which means they don’t offer a 529 plan deduction. Those states are Alaska, Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming. California, Hawaii and Kentucky do not offer any type of 529 tax deduction but do assess income tax.
This table breaks down the 529 tax deduction by state.
529 Tax Deductions by State
Alabama
$5,000 single filers; $10,000 joint filers
Alaska
None
Arizona
$2,000 single or head of household; $4,000 joint filers
Arkansas
$5,000 single filers; $10,000 joint filers
California
None
Colorado
Full contribution
Connecticut
$5,000 single filers; $10,000 joint filers
Delaware
$1,000 single filers; $2,000 joint filers
Florida
None
Georgia
$4,000 single filers; $8,000 joint filers
Hawaii
None
Idaho
$6,000 single filers; $12,000 joint filers
Illinois
$10,000 single filers; $20,000 joint filers
Indiana
20% tax credit on contributions (maximum credit $1,500)
Iowa
$3,785 per beneficiary
Kansas
$3,000 single filers; $6,000 joint filers
Kentucky
None
Louisiana
$2,400 single filers; $4,800 joint filers
Maine
Up to $1,000 per beneficiary
Maryland
$2,500 single filers; $5,000 joint filers
Massachusetts
$1,000 single filers; $2,000 joint filers
Michigan
$5,000 single filers; $10,000 joint filers
Minnesota
$1,500 single filers; $3,000 joint filers
Mississippi
$10,000 single filers; $20,000 joint filers
Missouri
$8,000 single filers; $16,000 joint filers
Montana
$3,000 single filers; $6,000 joint filers
Nebraska
$10,000 single filers; $5,000 married filing separately
Nevada
None
New Hampshire
None
New Jersey
$10,000 per taxpayer
New Mexico
Full contribution
New York
$5,000 single filers; $10,000 joint filers
North Carolina
None
North Dakota
$5,000 single filers; $10,000 joint filers
Ohio
Up to $4,000 per beneficiary
Oklahoma
$10,000 single filers; $20,000 joint filers
Oregon
$150 tax credit single filers; $300 tax credit joint filers
Pennsylvania
$17,000 single filers; $34,000 joint filers
Rhode Island
$500 single filers; $1,000 joint filers
South Carolina
Full contribution
South Dakota
None
Tennessee
None
Texas
None
Utah
4.95% tax credit per beneficiary
Vermont
10% credit on up to $2,500 for single filers; $5,000 joint filers (maximum $250 per taxpayer, per beneficiary; VHEIP is the only eligible plan)
Virginia
Up to $4,000 per account
Washington, D.C.
$4,000 single filers; $8,000 joint filers
Washington
None
West Virginia
Full contribution
Wisconsin
$3,860 per beneficiary; $1,930 for divorced parents or those married filing separately
Wyoming
None
Claiming 529 Plan Tax Benefits
To claim a tax deduction or credit for 529 plan contributions, you must live and file taxes in a state that offers these benefits. You must also be eligible to get a tax break, based on your relationship with the account beneficiary.
In most states, any contributor to a 529 plan can claim a tax break, regardless of whether they’re the account owner or not. However, some states limit tax benefits to account owners only. That means grandparents, aunts and uncles or other contributors would be excluded from deducting contributions or claiming tax credits.
The good news is that there are no time limits on claiming education tax benefits associated with a 529 college savings plan if you’re eligible to do so. Unlike Coverdell Education Savings Accounts (ESAs), which require you to withdraw all assets once the beneficiary turns 30, 529 plan money can stay in the account indefinitely. So, as long as you’re making contributions you could still claim a deduction or tax credit if you’re eligible.
Is Contributing to a 529 College Savings Plan Worth It?
Saving money in a 529 plan can be worth it for a few reasons, starting with the laundry list of tax breaks they offer. Contributions grow on a tax-deferred basis, so you’re not having to pay tax on any earnings while the money is in the account. Any qualified withdrawals are tax-free, as long as you use them for eligible higher education expenses. You can also withdraw up to $10,000 without a tax penalty to pay for qualified expenses for grades K-12.
You can open a 529 plan and contribute money to it on behalf of any eligible beneficiary, including yourself or your spouse. Should your beneficiary decide not to go to college or if they don’t use up all of their savings, you could transfer the money to a different beneficiary. And as outlined in the table above, some states offer tax breaks for college savings in the form of deductions or credits.
Aside from those benefits, a 529 plan can offer a better rate of return on your money compared to keeping money in a high-yield savings account or even a CD. They also allow for more flexibility than savings bonds. And while you could tap into an Individual Retirement Account (IRA) to pay for college, that could shortchange your retirement savings and potentially trigger some tax consequences.
The Bottom Line
Getting a head start on college planning can help you to be better prepared when it’s time for your student to head off to school. Saving money in a 529 plan can benefit you at tax time and your money may have more room to grow than it would sitting in a bank account. Reviewing your 529 tax deduction by state can help you figure out how much of an additional tax advantage you might get from saving.
Financial Planning Tips
If you’re ready to start saving for college but you don’t know how to approach it, getting professional advice can help. A financial advisor can walk you through different college savings options so you can choose the one that best fits your needs and situation. Finding a financial advisor doesn’t need to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
When comparing 529 savings plans, remember that you’re not locked into choosing your state’s plan. You could invest in a different state’s plan if you prefer the range of investment options offered or if another plan allows for higher lifetime contribution limits. Keep in mind, however, that your choice of plan may affect your ability to deduct those contributions on your state income tax return.
Rebecca Lake, CEPF®
Rebecca Lake is a retirement, investing and estate planning expert who has been writing about personal finance for a decade. Her expertise in the finance niche also extends to home buying, credit cards, banking and small business. She’s worked directly with several major financial and insurance brands, including Citibank, Discover and AIG and her writing has appeared online at U.S. News and World Report, CreditCards.com and Investopedia. Rebecca is a graduate of the University of South Carolina and she also attended Charleston Southern University as a graduate student. Originally from central Virginia, she now lives on the North Carolina coast along with her two children.
A life insurance policy can provide your loved ones with a death benefit should something happen to you. Permanent life insurance can also accumulate a cash value that you can withdraw or borrow while you’re still living. For example, you might use whole or variable life insurance for college savings to pay tuition bills, room and board or other costs. Is using life insurance to pay for college a good idea? There are some pros and cons to consider. Talking to a financial advisor can help you decide on the best way to save for college costs.
Understanding Life Insurance and Cash Value
Life insurance comes in different varieties, but the two main categories are term and permanent life. Term life coverage insures you for a set time period. If you pass away during the term, the policy pays out a death benefit to your beneficiaries that they could use to pay for college or other expenses. If you outlive the term, the policy terminates and no benefit is paid out.
Permanent life insurance, on the other hand, covers you for the duration of your life as long as premiums are paid. Certain types of permanent life insurance can also include a cash value component. As you pay in premiums monthly or annually, part of that premium is deposited into an interest-bearing account. You can then withdraw cash value or take out a loan against it during your lifetime.
Term life, meanwhile, doesn’t build cash value. However, it’s generally less expensive than permanent life insurance coverage. If you’re specifically interested in accumulating cash value with life insurance, you might be able to do that with a permanent whole life, universal life or variable life policy. The main difference between them lies in how the cash value account earns interest.
Can You Use Life Insurance for College Savings?
Yes, if you have cash value in a life insurance policy, you could use it to pay college expenses. There are typically three ways to do that:
Take a loan against your cash value
Withdraw cash from the policy
Surrender the policy
When you get a loan from a life insurance policy, you’re borrowing a lump sum from the cash value. You may not need to pay anything back toward the loan while you’re still living. When you pass away, the remaining loan balance is deducted from the death benefit and any remaining amount is paid to your beneficiaries.
You might choose to withdraw cash instead if your policy doesn’t allow for loans. A withdrawal would allow you to get cash for college or other expenses. Again, the death benefit would be reduced when the time comes to pay out a claim.
The final option is to surrender the policy altogether in exchange for its cash value. If you surrender, the policy terminates and you’ll no longer have coverage. You might choose this option to use life insurance for college savings if you have another life insurance policy as a backup or if you believe you have sufficient assets that make coverage unnecessary.
How to Use Life Insurance for College Savings
If you’d like to tap into your life insurance policy to pay for college, the first step is making sure that you can actually do so. A quick call to your insurance company or a review of your policy documents should tell you whether you have a term life or permanent life insurance policy and if it’s permanent, where there’s a cash value component.
Assuming that your policy has some cash value, the next step is deciding how to go about withdrawing it. Your insurance agent should be able to walk you through the different options. You may also want to talk to your financial advisor to discuss whether it makes more sense to borrow from your policy, withdraw the cash value or surrender it altogether.
If you’re opting for a loan or cash value withdrawal, you’ll need to know how much cash value is available and what amount to withdraw for college costs. You can then make the request to the insurance company to get the cash. Life insurance loans don’t require all the usual hoops associated with personal loans or student loans, though there might be some paperwork you need to fill out.
Once everything is finalized, the life insurance company will cut a check to you for the cash value that you’re taking out. You can then deposit it to your bank and once it clears, use the money to pay for college expenses.
Should You Use Life Insurance to Pay for College?
Life insurance isn’t designed to be a college savings vehicle, per se. Its primary function is to help people leave a financial safety net behind for their loved ones should the worst happen. Life insurance beneficiaries can use the death benefit from a policy to cover a wide range of costs, including mortgage payments, everyday expenses, final expenses and credit card bills.
Education expenses can also be added to that list and there are a few good reasons to consider using life insurance for college savings. Here are some of the advantages of life insurance as a college savings tool.
It’s flexible since you can withdraw or borrow against your cash value and use it to pay education expenses at your own pace.
Life insurance policies and any loans you might take from them, typically don’t affect a student’s ability to qualify for financial aid.
You can continue accumulating interest until you’re ready to withdraw it and you’re not penalized if your child decides not to go to college.
Coverage is lifelong, which means you could use your cash value to fund college for your children, grandchildren or even great-grandchildren.
There are, however, some downsides to using life insurance for college savings in lieu of a tax-advantaged plan, such as a 529 account or even a Coverdell Education Savings Account (ESA). Here are some of the most important things to keep in mind.
Cash value can take time to accumulate in a permanent life insurance policy and it’s possible that you won’t have enough to pay for college costs when the need arises.
A 529 college savings account may offer a higher rate of return, along with tax advantages.
Permanent life insurance can be more expensive than term life insurance when you factor in the premiums, upfront fees and recurring fees that you might pay.
Withdrawing or borrowing against cash value shrinks the death benefit that you’re able to leave behind for your loved ones.
A financial advisor might recommend incorporating life insurance into your college savings plan, but as just one piece, not the main focal point. For instance, you might set up a 529 for each of your children and contribute money to it each year that grows on a tax-deferred basis. When your child is ready to go to school, you can withdraw that money tax-free as long as it’s used for qualified higher education expenses.
If you pass away while your child is still in school, your life insurance policy can help to cover any remaining costs to help them finish their education. And if you have a 529 plan but your child doesn’t go to college, you could always transfer it to another beneficiary without a penalty.
The Bottom Line
Using life insurance for college savings is something you might consider if you have a permanent policy. It’s important to consider all the options for funding higher education, including a 529 plan or Coverdell account, to determine what best fits your needs. And if you don’t have a life insurance policy yet, you might want to get a rate quote to get an idea of how much you’ll pay for coverage.
Insurance Planning Tips
If you’re not sure where to get started with college planning, a financial advisor can help. An advisor can review your financial situation and your student’s estimated needs, then offer solutions for meeting them. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
When comparing life insurance policies, it’s important to consider not only what you’ll pay but how much cash value you might be able to accumulate. Whole life policies, universal life policies and variable life policies can all take very different approaches to growing your cash value.
Rebecca Lake, CEPF®
Rebecca Lake is a retirement, investing and estate planning expert who has been writing about personal finance for a decade. Her expertise in the finance niche also extends to home buying, credit cards, banking and small business. She’s worked directly with several major financial and insurance brands, including Citibank, Discover and AIG and her writing has appeared online at U.S. News and World Report, CreditCards.com and Investopedia. Rebecca is a graduate of the University of South Carolina and she also attended Charleston Southern University as a graduate student. Originally from central Virginia, she now lives on the North Carolina coast along with her two children.
If you’ve been paying attention to the news within the past few months, you’ve likely been hearing a lot about the rise of the robo-advisor.
Robo-advisors is the term given to any number of automated investing services that have popped up in recent years that aim to make investing easier, more affordable and in some instances negate the need for a traditional financial or investment advisor.
While their investment recommendations vary to some degree, many of them use algorithms based on Modern Portfolio Theory (MPT) to aid in choosing diversified investments and asset allocation based on your risk tolerance. MPT helps to maximize expected return for your portfolio based on your risk profile.
While I still think that some people could benefit from working with a human financial planner one on one, I do think that for most investors using an automated investing service makes a ton of sense.
Today I thought I would do a review of Wealthfront, one of the top and most well respected automated investing services available today.
UPDATE: Sign up for Wealthfront via this exclusive Bible Money Matters link to get $5,000 managed for free:
Sign up for Wealthfront and get $5,000 managed for free
Wealthfront History
Wealthfront launched their automated investment service in 2011 and the company is currently based in Redwood City, California. In 2012 Wealthfront launched a daily tax-loss harvesting service. From 2013 to 2014 the company went through some tremendous growth, growing by over 450% in one year. By 2019 Wealthfront now has more than $12 billion of assets under management.
Wealthfront never holds your portfolio when you invest with them, they just manage it. The portfolio is actually held with Royal Bank of Canada.
How Does Wealthfront Work?
When you sign up for Wealthfront you start by completing a questionnaire that is aimed at determining your risk tolerance. Once your risk tolerance is determined asset allocations are set that will remain the same regardless of how much you have invested.
The portfolios are based on a mix of 6 – 8 asset classes that includes both U.S. and international stocks and bonds. They invest mainly via the following ETFs, although that is subject to change.
U.S. Stocks (VTI)
Foreign Stocks (VEA)
Emerging Markets (VWO)
Real Estate (VNQ)
Dividend Stocks (VIG)
Emerging Market Bonds (EMB)
Municipal Bonds (MUB)
CorporateBonds (LQD)
US TIPS (SCHP)
Natural Resources (XLE)
When you invest with Wealthfront your diversified asset allocation will depend on the tax status of your account (taxable or tax deferred), and what is the most tax efficient method of investing for you.
In essence, you’ll get a highly diversified, low cost portfolio that is suited to your level of risk, time horizon and other factors.
Signing Up For Wealthfront
Signing up for Wealthfront is a quick process. Here’s what you’ll need to do.
Once you begin the signup process it will first have you go through a risk tolerance assessment.
Once you’ve answered all the questions, it will give you a quick rundown of what assets and allocation that they would suggest for you, in both a taxable account and retirement account.
If everything looks OK, you’re ready to open your account.
Available account options with Wealthfront include:
Standard taxable account
Joint investment account
Trust account
Traditional IRA
Roth IRA
SEP-IRA
Wealthfront 529 College Savings Plan
Once you choose which account type you want and hit continue, it will take you through the process of entering all of your basic information including:
Full name
Address
Birth date
Phone number
Social security number
Income
After filling out the basics it will ask you to fund your account. Your options for funding the account include:
Bank transfer (3-5 business days to get started)
Wire transfer (1 business day to get started)
Account transfer (5-10 business days)
Once you submit your application and confirm your email address you just have to wait for your account to be approved. After approval you can login to your account dashboard to confirm transfers, view your account summary, view your plan, transactions, documents and more.
Wealthfront Features
So what are some of the features that you get when you open a Wealthfront account?
Proven passive investing strategy that gives you a diversified portfolio
So what do you invest in when investing with Wealthfront?
We invest with an equity orientation to maximize long-term returns. Each of our selected asset classes is represented by a low cost, passive ETF. We continuously monitor and periodically rebalance your portfolio to maximize your chance of investment success for the long run. We also attempt to minimize your taxes by analyzing the taxes likely to be generated by any given asset class, and then allocating different asset classes in taxable and non-taxable (retirement) portfolios. We use Modern Portfolio Theory (MPT) to identify the ideal portfolio for each client.
Your portfolio will consist mainly of low cost ETF index funds that will be tailored to your risk tolerance, with intelligent dividend reinvestment and regular portfolio rebalancing. It is fully diversified. For a complete look at the Wealthfront strategy you can check it out here.
Wealthfront offers a broad suite of tax efficient passive investment products. These strategies are known as PassivePlus, and in the past have mainly been available only to high dollar investors. Wealthfront didn’t invent these strategies, but it’s team of PhDs led by reneowned economist Burton Malkiel, along with their investment technology has made these products available to anyone. Among the strategies included in PassivePlus:
Tax loss harvesting: Tax-loss harvesting essentially takes investments that have declined in value and selling them at a loss, generating a tax deduction. The tax deduction helps to reduce your taxes. Wealthfront’s service allows daily tax harvesting to be possible, which can help to maximize gains versus a traditional year end tax loss harvesting. This service is available at no extra cost to investors.
Stock-level Tax-Loss Harvesting: Available for no extra cost to taxable accounts over $100,000, Stock-level Tax-Loss Harvesting is an enhanced form of Tax-Loss Harvesting that looks for movements in individual stocks within the US stock index to harvest more tax losses and lower your tax bill even more.
Risk Parity: Available for an additional 0.03% to taxable accounts over $100,000, Risk Parity is an alternative methodology to allocate capital across multiple asset classes, much like Modern Portfolio Theory (MPT), also known as mean-variance optimization. Historically, Risk Parity has generated better returns for a given level of portfolio risk than the more common MPT.
Smart Beta: Available for no extra cost to taxable accounts over $500,000, Smart Beta is an investment feature designed to increase your expected returns by weighting the securities in the US stock index of your portfolio more intelligently.
Wealthfront also invests in index funds which tend to have little turnover, and as such will likely realize lower capital gains taxes. They also use dividends to rebalance your portfolio throughout the year, lowering capital gains. They optimize asset classes and allocations depending on whether an account is taxable or tax advantaged.
No commission fees
With Wealthfront you’re never going to pay fees for purchase of the ETFs in your account.
Other Wealthfront Feature Updates
Wealthfront is constantly innovating, and has had a myriad of other updates in the past year or so, all designed to make investing easier, more efficient, and to bring you better returns. Here are a few of the features and functionality that set them apart.
Free Financial Planning: The new free financial planning experience, unique to Wealthfront, using the Path planning engine.
Tailored Transfers: Instead of selling everything at once, use our tailored transfer process to migrate your investments tax-efficiently over time.
Portfolio Line of Credit: This line of credit is available for any Wealthfront client with an Individual or Joint Wealthfront account valued at $100,000 or more. There’s no set up – if you’re an eligible Wealthfront client then you already have access. Your line of credit is secured by your diversified investment portfolio, so current rates are as low as 3.25-4.5% depending on account size – lower than most HELOC loans. Borrow the amount you need up to 30% of account value, when you need, for whatever you want. Repay on your own schedule.
Free Automated Financial Planning
In December of 2018 Wealthfront became the first robo-advisor to offer software based financial planning for free to anyone through their app or on their website. Some other services will offer planning to clients, but usually at a premium, and only through a call with a CFP on the phone.
With Wealthfront’s financial planning tools you can connect to your existing financial accounts in a few minutes, and then by tracking your actual spending and saving patterns to help you figure out how your financial future may look.
It helps you to figure out how much you need to save now to reach your future goals, and helps you to determine if you’ll be able to live the same lifestyle you live now, in retirement.
The free financial planning help takes the guesswork out of figuring out if your hoped for future is even attainable based on your current spending and saving patterns. It helps you take a look at “what-if” scenarios, and help you figure out what the impact of a raise at work, or saving more every month might be.
The free automated financial planning service is like having a personal financial planner, but without the need for a bi-annual meeting at an expensive office with a planner that hardly pays attention to your needs. Here’s a look at it from Wealthfront:
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Home Planning In Financial Planning Software
The financial planning software brings clients out of the window-shopping phase of home buying and into planning and saving with the help custom advice and recommendations. The Path advice engine uses third party data on home prices and mortgage rates combined with your financial information to provide an accurate estimate of what you can expect to afford when ready to purchase a home — whether it’s six months or five years from now.
The home affordability estimate given by the tool even accounts for expenses beyond the mortgage, such as closing costs, property taxes, maintenance, and insurance.
College Planning In Financial Planning Software
In addition they also now have a College planning tool that looks at every important aspect of college planning and deliver a complete, personalized assessment.
It will allow you to choose a college that your child may attend, enter some personal data about yourself, after which it will calculate the financial aid you can expect to receive at that school. Then you can setup how much to save, and see the effect of adding more to your savings. At the end you can link it to your Wealthfront 529 College Savings Plan!
The Wealthfront 529 College Savings Plan
This is another investment account unique to Wealthfront. They offer one of the lowest cost 529 plans from an advisor, that offers more diversification for higher returns. (Many plans offer a very limited range of investment options).
A recent Sallie Mae study shows that more and more parents are saving for college, but are nowhere near prepared to meet their goals because they are saving solely through savings accounts earning less than 1% interest. The Wealthfront 529 College Savings Plan was created to help change this, to help parents grow their child’s college savings, while minimizing the amount of risk based on your level of risk tolerance.
Wealthfront’s 529 uses 20 different glide paths, tailored to match both the beneficiary’s age, as well as the account owner’s financial situation and risk tolerance. Our glide paths transition asset allocations much more continuously, which again means you may be less likely to be hurt by market movements.
This is definitely something to check out if you’re interested in saving for your child’s education.
Wealthfront Cash Account
Wealthfront recently implemented a great new tool for savers. If you’ve got cash you want to keep out of the market and low risk, but you still want to earn a good amount of interest on it, the Wealthfront Cash Account might be just what you’re looking for.
The cash account is an FDIC insured account (up to $1 million dollars, 4 times the traditional bank insurance), that charges no fees and has only a $1 minimum.
At the time we updated this article it’s currently earning 2.57% APY. This makes their APY the highest on the market according to Bankrate, so if you’ve got extra cash laying around it makes their account a no brainer to sign up for.FDIC insured AND the best rate.
The Bankrate industry average savings rate is only 0.10%, so you can now earn over 25x more than the national average on cash balances!
It’s fast and easy to setup your cash account, it takes just minutes. Definitely worth checking out – whether you already have a Wealthfront account or not.
Fees, Charges & Minimums For Wealthfront
What are the fees that you’ll have to pay for the Wealthfront investment service? The good news is they offer some extremely competitive rates.
Wealthfront charges a monthly advisory fee based on an annual fee rate of 0.25%. The only other fee you incur is the very low fee embedded in the cost of the ETFs you will own that averages 0.15%.
Fees
You pay the following fees to Wealthfront:
So if you have $10,000 in your account and you signed up via our link, you’ll have no charge for the first $5,000, and a 0.25% fee on the second $5,000.
When you sign up you’ll also have the chance to refer other users to the service to earn $5,000 more per user in free asset management, beyond the first $5,000. If you know enough people who want to sign up, you could definitely increase the amount managed for free very quickly!
Account Minimums
An account with Wealthfront does come with a minimum balance.
Our account minimum is $500, which entitles you to a periodically rebalanced, diversified portfolio of low cost index funds enhanced with our daily tax-loss harvesting service (for taxable accounts).The account minimum required to qualify for our Stock Level Tax-Loss Harvesting is $100,000.
So to open an account, you’ll need a minimum of $500. Why not start with $500, and then fully fund your Roth IRA for the year ($5500 for 2018)?
There is also a minimum withdrawal of $250, and you can’t withdraw below the account minimum of $500.
If you withdraw all of your funds it will transfer your money and close your account for you, with no exit fees.
Wealthfront – Great Low Cost Investment Advisory Service
When I first heard about Wealthfront a few months ago, I wasn’t sure if it would be a service that I could recommend. After doing my due diligence, however, I believe they’re a great service that would be perfect for a lot of people.
Wealthfront is the only robo advisor who offers investment management, financial planning and banking-related services through their software. Anyone can open a Wealthfront investment account and receive a personalized, globally-diversified investment portfolio and access a variety of tax-efficient services.
I’d highly recommend giving them a chance if you’re looking for an easy place to start investing – that will work for you over the long haul.
Sign up for Wealthfront and get $5,000 managed for FREE