Reading list for young people and their families

References to books and online materials are sorted by age groups from pre-schoolers to grandparents.  URL links are printed in blue letters to provide quick access to a website. Click the computer’s mouse on those letters.

Pre-Schoolers

books

  • Dollars, by Mary Hill. Welcome Books (™): Money Matters. Danbury, 2005. Teaches children to recognize and count money. 
  • Spending and Saving, by Mary Hill. Welcome Books (™): Money Matters. Danbury, 2005. Examples of good ways to use money. 

internet reading

internet videos

Pre-Teens

books

  • The Kids’ Money Book. Earning, Saving, Spending, Investing, Donating. by Jamie Kyle McGillian, Sterling Children’s Books, New York, 2016. Author encourages children to earn and use money wisely.
  • Money $ense for Kids. by Hollis Page Harmon, Barrons, Hauppauge, 2005. An age-appropriate explanation of investing.
  • Investing Money. by Helen Thompson, Mason Crest, Broomall, 2011. A thorough and useful explanation of investing.  
  • Personal Management. Boy Scouts of America Merit Badge Series.  Brent A. Neiser, et al. 1996, 2012. A brief guide to personal finance.  

internet reading

internet videos

Teens

books

  • The Teenage Investor. How to Start Early, Invest Often, and Build Wealth. Tim Olson, McGraw-Hill, New York, 2003. This teenage author gives a complete explanation of the methods, risks, and rewards of investing in financial markets.  
  • A Gift to My Children. A Father’s Lesson for Life and Investing.  Jim Rogers. Random House, 2009. A successful investor’s good advice to teens.  
  • Dollars & Sense. A Kid’s Guide to Using- not Losing- Money. by Elaine Scott and David Clark, Charlesbridge, Watertown, 1916. A practical explanation of our financial system.  
  • Neale S. Godfrey’s Ultimate Kids’ Money Book. by Neale S. Godfrey and Randy Versogstraete. Simon & Schuster, New York, 1998. An illustrated introduction to personal finance. 
  • The New Totally Awesome Money Book for Kids. by Arthur Bochner, Rose Bochner, and Adriane Berg, Newmarket Press, 2009. For pre-teen and teenage entrepeneurs.
  • TeenVe$tor. The Practical Investment Guide for Teens and Their Parents. by Emmanuel Modu and Andrea Walker. teenvestor.com. Guidance on ways of earning an investment return.   
  • Street Wise. A Guide for Teen Investors. Janet Bamford, Bloomberg Press, Princeton, 2000. A narrow view of investing, focused on the time consuming of investing in stocks.
  • Exploring Business and Economics. Investing Your Money. Fred Barbash, Chelsea House Publishers, Philadelphia, 2001.
  • Confessions of a Scholarship Winner.  Kristina Ellis, Worthy Publishing, Brentwood, 2013. An inspiring story of a teenager’s quest for earning $50,000 in scholarships.  

internet reading

internet videos

Young Adults

books

  • The Index Card.  Why Personal Finance Doesn’t Have to be Complicated. Helaine Olen, Harold Pollack. Penguin Publishing, New York, 2013. Read my book review in http://wp.me/p1LlDo-KQ.
  • The Little Book of Common Sense Investing. John C. Bogle, John Wiley & Sons, Inc. Hoboken, 2007.  The scope of this book concerns investing wisely and cheaply in the U.S. stock market. See book review in http://wp.me/p1LlDo-qI.  
  • All About Index Funds, second edition.  Richard A. Ferri, CFA. McGraw Hill, 2007. Author describes the market indices, high-risk index funds, and low risk index funds.
  • Investing Made Simple.  Anthony L Loviscek & Randy I Anderson, Broadway Books, New York, 1992, 2003, 2004. An excellent description of investment choices accompanied by the advantages and disadvantages of those investments.  
  • Stocks for the Long Run, 3rd Ed. Jeremy J. Siegel, McGraw-Hill, New York, 2002. An authoritative textbook on investing in stocks.  
  • Investing in REITs, Real Estate Investment Trusts. 4th Edition.  Ralph L. Block, Bloomberg Press, Hoboken, 2012. A thorough explanation of the risks and returns from REITs.  
  • How to make your money last.  The Indispensable Retirement Guide. Jane Bryant Quinn, 2016, Simon & Shuster, New York. 366 pages. The author is an acclaimed financial journalist who advises people about financing and reinventing life after leaving the workforce. Here’s a link to my book review, http://wp.me/p1LlDo-JE. 

internet reading

internet videos

  • short term savings: https://youtu.be/zer96OhQdxg . Creative ways of saving for current needs during periods of fluctuating monthly income (‘income inequality’).

Parents and Teachers

books

  • Dollars & Sense for Kids, by Janet Bodnar. Kiplinger Books, Washington D.C., 1999. Advice on teaching the value and use of money to children and young adults.
  • How millennials manage money.  https://www.navient.com/assets/about/who-we-are/April_2018-Money-Under-35-Managing-Money-report.pdf . This 2017 survey offers a profile of the financial behavior of young-adult Americans.
  • The Money Tree Myth: A Parents’ Guide to Helping Kids Unravel The Mysteries of Money. Gail Vaz-Oxlade, Stoddart Publishing, Toronto, 1996. A thorough volume of advice to parents on teaching their pre-school, pre-teen, and teenage  children to manage money for a lifetime.  
  • Kids and Money. Giving Them the Savvy to Succeed Financially.  Jayne A. Pearl. Bloomberg Press, Princeton, 1999. Author interviewed parents, used experience with own child, and sought advice of consultants to write this book for parents. 
  • Smart Money Smart Kids. Raising the Next Generation to Win with Money.  Dave Ramsey and Rachel Cruze.  Lampo Press, 2014, Brentwood. Author speaks with experience about recovering from catastrophic debt and teaching children how to avoid debt.  
  • Make Your Kid a Money Genius (even if you’re not). Beth Kobliner, Simon & Schuster, New York, 2017. See my book review in the following web site, http://wp.me/p1LlDo-P8.
  • Happy Money, The Science of Smarter Spending. Elizabeth Dunn and Michael Norton. Simon & Schuster, New York, 2013. Includes good ways and benefits of sharing money, illustrated by video in https://youtu.be/c39wUIKUSk0 .
  • Earn It, Learn It. Teach Your Child the Value of Money, Work, and Time Well Spent.  Alisa T. Weinstein, Sourcebooks, Naperville, 2011. The pre-teen child earns money from their parent by choosing a task from a career profile and completing it in a timely fashion.
  • Paying for School. How to Cover Education Costs from K to Ph.D.  Robert Brokamp, The Motley Fool, Inc. 2003. Discusses ways to finance the costs of attending private schools, colleges, and graduate schools.
  • Paying for College Without Going Broke.  2018 Edition. Kalman A. Chany with Geoff Martz. Penguin Random House. The Princeton Review, 2017. Authors offer strategies for selecting colleges and paying the cost. 
  • The Financial Diaries. How American Families Cope in a World of Uncertainty.  Jonathon Morduch and Rachel Schneider. 2017, 233 pages, Princeton University Press.  Authors describe the coping mechanisms of families trapped in conditions of financial insecurity.  
  • Can the Poor Save? Saving & Asset Building in Individual Development Accounts.  Mark Schreiner & Michael Sherraden.  Transaction Publishers, 2007. Low-income persons might benefit from an individual development account (IDA). 

internet reading

internet videos

Grandparents & Third parties

internet SITES

Copyright © 2019 Douglas R. Knight 

Simple Conversations About Money

Mary Hill is an author of children’s books.  Her set entitled Money Matters is designed to teach beginners how to count and use money.  The book titles are Pennies, Nickles, Dimes, Quarters, Dollars, and Spending and Saving.  These small thin books are easy for pre-school children to read and carry.  About 18-24 pages in each book alternate between a simple sentence on the left page and a full sized illustration on the right page. The sentences are printed in large letters and illustrated with attractive photographs of real money and real people. A simple glossary is provided on the last page to facilitate understanding of the terms and pictures. 

I found 2 of her 6 books in the Children’s section of our city library.  In Dollars (ref 1), the U.S. dollar bill and dollar coin are described by appearance and cash value.  Denominations of dollar bills are illustrated for $1 through $100.  The attentive reader will quickly learn to recognize real money in contrast to play money. 

In Spending and Saving (ref. 2), author Hill explained how earned income is saved and spent.  Her pictures of adults at work show a healthy lifestyle for generating personal income.  Children learn that they can save money by giving it to a bank teller or putting it in a piggy bank.  The topic of spending money applies to choices among expensive items, such as a house, and everyday items such as groceries and school supplies. The attentive reader is exposed to several ways that adults earn money and use it wisely.

Young children who like to use computers can learn more about money at these websites:

References

  1. Dollars, by Mary Hill. Welcome Books (™): Money Matters. Danbury, 2005. 
  2. Spending and Saving, by Mary Hill. Welcome Books (™): Money Matters. Danbury, 2005. 

Copyright © 2019 Douglas R. Knight 

Why This Blog?

Everyone needs money to take care of themselves. Yet people generally mismanage their money and retire with inadequate savings.  Poverty is a miserable condition and I see no other way to completely escape it than to invest wisely.  The purpose of this blog, “Raising Young Investors”, is NOT to create a generation of tycoons but RATHER to guide young people toward financial security. I hope WE can inspire young people to make investing a lifetime habit.  The process of developing young investors is summarized in an Overview.

 Douglas R. Knight 

Saving for Unemployment

An emergency fund is used to pay 3-9 months of living expenses during unemployment. Keep it for retirement.  

Protect Yourself

Unemployment means that you aren’t paid for doing work.  People who either lose their job or retire from work are unemployed. Could you pay for living expenses during unemployment?  If not, you should start building an Emergency Fund. There are two important savings plans during life: the Emergency Fund and Retirement Account (ref. 1).  

Emergency Fund  

The emergency fund is used to pay living expenses during temporary unemployment and other unusual expenses such as big bills.  Workers should save 3-9 months worth of earned income in a secure savings account (ref. 2).  That’s a difficult task when also planning to buy expensive items such as cars and houses, or paying-off college loans.  Get a headstart in childhood by slowly saving cash in a custodial bank account.    

Retirement Account 

The retirement account is needed to pay living expenses during permanent unemployment in old age.  Contribute to your own retirement accounts as soon and often as possible (ref. 3).  Begin by opening a Roth IRA during childhood when you start reporting earned income to the Internal Revenue Service (ref. 4).  Employer-sponsored and Self-employed retirement plans should be opened at the first opportunity (ref. 5).  

About forty to fifty years of regular investing are needed to build adequate savings for retirement (ref. 3). Plan on investing in quality securities such as stock index funds and government bonds (ref 1,6).  Begin with stock index funds early in life and add the bonds late in life, finishing with a 90% investment in stock funds and 10% investment in bonds (ref. 7).  

Retirement accounts have special rules for investing money (contributions) and removing money (withdrawals).  

  • Withdrawals before age 59½ years are generally not permitted without paying a fine and taxes [check the rules for exceptions in ref. 5].  There are no fines after age 59½ years. 
  • Roth IRA. You must pay taxes on all contributions and the contribution limits are $5,500 per year [check ref. 5 for changes].  Withdrawals after age 59½ are not taxed and there are no mandatory withdrawals. 
  • Other IRAs and retirement plans. The contribution limits vary from $5,500 to $19,000 depending on the account [check ref. 5 for changes].  You don’t pay taxes on any contribution, but withdrawals are always taxed.  The government requires partial withdrawals each year after age 70½ years. 

References

1. The Index Card.  Why Personal Finance Doesn’t Have to be Complicated.  Helaine Olen, Harold Pollack. Penguin Publishing, New York, 2013.

2. Emergency Fund Calculator, MoneyUnder30 . com:  https://www.moneyunder30.com/emergency-fund-calculator.

3. Retirement Income Calculator:  https://retirementplans.vanguard.com/VGApp/pe/pubeducation/calculators/RetirementIncomeCalc.jsf

4. Video on compound interest in a Roth IRA: https://youtu.be/6dzpNd3megg 

5. Retirement plans:  https://www.irs.gov/retirement-plans 

6. Saving and Investing for Students, SEC resources for youth:  https://www.investor.gov/search/node/students

7. Warren E. Buffett, Chairman of the Board. Letter to the shareholders of Berkshire Hathaway, Inc., 2013. Page 20, 2/28/2014.

Copyright © 2019 Douglas R. Knight

The Turtle and the Rabbit

Walt Disney made a wonderful cartoon about a famous race between the tortoise and the hare [‘tortoise’ and “hare” are old-fashioned names for ‘turtle’ and “rabbit”]. The story began when the rabbit teased the turtle for walking slowly.  To everyone’s surprise, the turtle challenged the rabbit to a race.  Their race course was a long track that had a starting line and a finishing line.  At the start of the race, the rabbit ran fast and far ahead of the turtle.  But the careless rabbit suddenly stopped to tease the turtle some more by going to sleep along the race course instead of crossing the finishing line.  The turtle quietly passed the sleeping rabbit and won the race by crossing the finishing line in first place (ref. 1,2).

What happened?  The turtle refused to feel bullied by the rabbit and fought back by suggesting the race and then running the entire length of the race course.  The turtle was determined to finish the race and didn’t quit running.

The moral for investors: success depends on determination and patience.

References

  1. The Tortoise and the Hare, by Walt Disney. 1934.  [https://youtu.be/MeZe2qPLPh0 ]
  2. The Aesops Fables: The Hare and the Tortoise.  Library of Congress. http://www.read.gov/aesop/025.html

Copyright © 2018 Douglas R. Knight

Advice for young adults on getting started with investing

An excellent article in today’s newspaper (ref. 1) presented clear advice on how to become wealthy without paying hefty fees:

  • Begin by finding good, free financial advice in the internet.  Search for tools and advice on creating a budget, finding affordable housing, building a financial plan, and saving for retirement.
  • Build the foundations of a budget, rainy-day savings, and retirement savings.
  • Invest money you won’t need for 5 years.  
  • Begin investing as early as possible and compound your interest.  

Numerous writers and seasoned investors offer the same advice.  Find more useful information in references 2-6.  

References

  1. Ny Anna-Louise-Jackson. Make your money grow before hiring an advisor. The Columbus Dispatch, November 4, 2018, page H7.
  2. Helaine Olen and Harold Pollack. The Index Card. Why Personal Finance Doesn’t Have to Be Complicated. Penguin Random House, New York, 2016. 
  3. Do-it-yourself investing- Introduction.  Small Trades Journal, 2013.
  4. Warren Buffett’s advice to nonprofessional investors. Small Trades Journal, 2014.  
  5. My Money Five. MyMoney.gov.
  6. Overview. RaisingInvestors.blog, 2018.

Story: Saturday morning with the grandchildren

I recently shared stories about grandchildren with one of the partners in our investment club.  Her 6 years old grandson and 4 years old granddaughter visit her every Saturday morning.  Soon after arrival, the 4 year-old runs to the penny jar and puts a few coins in the piggy bank, counting their value during the process.  It’s a play activity without feelings of ownership by the child.  The 6 year-old performs chores for which he receives a salary of $2.  He originally wanted $5, but agreed to $2 after negotiations with grandmother.  In the near-future she will take them to the Dollar Store and let both of them spend a $1 anything they want.  They will make the purchase and live with their decision.  She wants them to learn shopping skills and the value of money.  Later on, their father will open a savings account for them at the local bank.  It’s the making of a family tradition.

Paying for College

For the purposes of this discussion, “college” refers to any postsecondary school [ vocational school, 2- & 4-year college, university, professional school ] that offers student aid administered by the U.S. Department of Education.  

SUMMARY: The cost of a 4-year college is over $20,000 a year and continues to increase at nearly 4% annually.  Paying, not borrowing, is the better way to finance a college degree.  Parents can start a payment plan early by investing in a tax-free “529” college savings account.  Adults should avoid using their retirement savings to pay a child’s college expenses. 

The more effort a family puts into creating a college budget, the better their student’s chance for educational and financial success.  There are six important issues to address in the budgeting process:

  1. Cost-reduction
  2. Affordability 
  3. Savings plan
  4. Scholarships and grants  
  5. Family income
  6. Student loan as the last resort

1. Reduce the cost

High school programs which are designed to reduce the cost of college can prepare students for academic achievement and save them thousands of dollars in college expenses.  Families are encouraged to consult teachers, counselors, principals, and colleges about available programs. Here are several types of programs: 

  • Advanced placement (AP) courses and exams are sponsored by the College Board and participating high schools (ref 1).
  • Early college high schools (ECHS) enable students to earn a high school diploma and a two-year associate’s degree or 2 years credit toward a bachelor’s degree.  Recruitment starts in middle school (ref 2).  
  • Community college classes are open to high school students without a diploma.  Completion of the classes demonstrates a student’s readiness for college and the earned credit might be eligible for transfer to other colleges (ref 3).
  • College-level examination program (CLEP), also sponsored by the College Board, is designed to award college credit for knowledge already acquired.  There are 33 CLEP exams that award 3-12 credit hours toward a college degree (ref 1).  

Students who wish to get a bachelor’s degree can save money by transferring credits from a community college to a four-year school.  Money is saved by paying less at the community college and taking fewer courses to graduate from the four-year school.  Firstly, it’s important to earn an associate’s degree before entering the receiver school.  Secondly, there’s a risk of losing credits during the transfer unless the participating colleges have an “articulation agreement” on which courses will be credited.  Thirdly, the participating colleges may have a transfer agreement that guarantees admission to the receiver school.  Try searching for information about “transfer students” in the school websites (ref 4). 

Carefully selected online degree programs may provide another opportunity to reduce college expenses (ref 4).  Other cost-reduction strategies include adequate, —not luxurious—, room & board, frugal spending habits during college, and graduation on time (ref 5,6).  

2. Choose an affordable college

Financial safety schools are those which are most affordable and likely to accept your academic credentials (ref 7).    Here are some tips for choosing a college that satisfies your needs:

  • Have a study goal and search for colleges that satisfy that goal.  
  • Search for colleges which are recommended by teachers, guidance counselors, and college-rating websites.
  • Use college-ratings to help find affordable colleges [hint: try finding schools with the lowest net prices such as those listed in ref 8; net price is what you might have to pay after receiving financial aid].
  • Attend a college fair [hint: ask your guidance counselor for information].  
  • Visit the websites of colleges that interest you.
  • Contact admissions offices and request guided tours of your chosen colleges. 
  • Review your acceptance letters and visit the admissions office to negotiate the best financial agreement.  

3. College savings

It’s cheaper to save than to borrow for college.  I would like to join others (ref 9,10,11,12) in advising parents to own a tax-free 529 Savings Plan (“Qualified Tuition Program”; “QTP”) for the benefit of their young child.  Owners of 529 savings plans receive favorable tax treatment on the investment returns.  The best time to start is before birth or in the first year of the child’s life.  It’s important to make regular deposits into the account, preferably by a payroll deduction plan.  Here are some strategic details:

  • By today’s rules, withdrawals from a parent-owned 529 Plan will have the least impact on the child’s eligibilty for financial aid in college (ref 13). 
  • The designated beneficiary of the Plan is either the child or a member of the child’s family. The designated beneficiary can be changed without transferring Plans, which allows an adult to start a 529 Plan before the birth of the child by designating a family member as the beneficiary (ref 12).
  • The accumulated savings can be transferred from one 529 Plan to another by way of a roll over.  The new Plan must be for the benefit of the same designated beneficiary (ref 12).  There are several potential advantages, including the transfer of ownership from a third-party (e.g., grandparent) to the parent, but; beware that some states prohibit the transfer of a 529 account unless the owner dies and the transfer is mandated by court order (ref 14,15)
  • 529 Plans started in year 2018 can be used to pay qualified educational expenses for primary, secondary, and postsecondary school.  Misuse of the Plan for unqualified expenses will incur a financial penalty.  529s started before 2018 cannot  pay for primary and secondary education; only the Coverdell ESA will pay those expenses (ref 12).
  • The maximum investment is several-to-many hundred-thousand dollars depending on the specific plan. The total contributions may not exceed an amount needed to pay qualified education expenses of the beneficiary.  The federal gift tax exclusion allows a tax-free limit of $14,000 ($28,000 if married, filing jointly) on annual contributions. 

There are other tax-advantaged ways of saving for college (ref 12,16): 

  • Coverdell Education Savings Accounts receive favorable tax treatment on investment returns when used to pay qualified educational expenses from kindergarten through college.  Eligible owners who file joint tax returns must have a modified adjusted gross income below $220,000. Their contribution limit is $2,000 per year up to the student’s 18th birthday (no more after age 18) and the account must be used before the student’s 30th birthday.  Owners may change the Coverdell account or its beneficiary (ref 12).  Owners may also rollover the Coverdell to a 529 (ref 17).  
  • Education Bonds are U.S. series EE Savings bonds issued after 1989 or U.S. series I Savings bonds, both of which are purchased by someone at least 24 years of age.  The earned interest is tax-free if the benefiiciary is named as a dependent on the owner’s tax return, the owner’s modified adjusted gross income is below an acceptable limit, and the education expenses are qualified (ref 12). 
  • IRA distributions are tax-free when used to pay qualified educational expenses, but: beware that any educational withdrawals will severely impair the advantage of earning compounding returns for retirement savings. 

Investments in mutual funds and custodial accounts (UTMA/UGMA) offer an unlimited opportunity for funding college.  However, the balances reduce the student’s eligibility for financial aid and the returns are taxable (ref 16). 

4. Scholarships and Grants

Scholarships and grants are awards of ‘free’ money to students that don’t require repayment.  The application process demands time and effort by the high school student, but it’s well worth the effort (ref 18).  Guidance counselors, reference librarians, and college financial aid officers are excellent sources of help.  Free listings can be found online (ref 19,20).    

5. Family Income

Students from high income families can rely on parents for financial help.  Otherwise, they may need to earn money to pay for college.  The work-study programs offered by colleges and private employers are good opportunities for students with a financial need (ref 21). 

6. Borrow?

Student loans can delay college graduates from saving for retirement, a mortgage, and other big projects (ref 22).  Still worse is the possible financial stress of paying a large debt (ref 9).  Therefore, use student loans as a last resort.  Federal student loans are generally the cheapest and safest when offered by the college financial aid office (ref 21).     

Third parties (e.g., grandparents)

The student’s immediate family and the college are counterparties to each other when it comes to paying for college.  Grandparents, relatives, and friends belong to the category of third parties.  Third parties are valuable sources of financial aid under the right circumstances:

  • Gifts less the $14,000 per year ($28,000 if married filing jointly) are exempt from the federal gift tax.  A special exemption of $70,000 per donor may be paid as a one-time, five-year gift to a 529 savings plan (ref 14).   
  • Gifts are excluded from the gift tax when they bypass the family as direct payments to the college.  Unfortunately, direct payments are counted by the college as “other income” that may disqualify the student from future aid.  The disqualification is not a practical concern during the student’s final year of college (ref 14,15).
  • Indirect payments to the family are likely to reduce the student’s eligibilty for need-based financial aid by inflating the “expected family contribution” (“EFC”) toward college expenses.  The inflation of EFC is less when gifts are paid to the parents instead of the student.  The best strategy for indirect payments is to contribute to a 529 savings account owned by the parents with the child as the beneficiary (ref 14, 15).  
  • A 529 account owned by a third-party does not inflate the EFC until payments are made toward the student’s college expenses.  To avoid inflating the EFC, the third-party owner should transfer their account to the parents before the student applies for college.  Beware that some states prohibit the transfer of a 529 account unless the owner dies and the transfer is mandated by court order (ref 14,15).
  • Money borrowed by parents does not hurt their student’s chances for financial aid.  Third parties can plan to make a legitimate loan to parents that includes a charge for interest.  Once the parents are done paying for college, the third party has the option of forgiving the loan (ref 15).  

Parents and grandparent-guardians should both avoid dipping into retirement savings to pay for a child’s college education.  Instead, the child can earn income and apply for student loans.  

Consultants

Families who want professional help with the process of paying for college can hire a financial aid consultant.  Before hiring a consultant, review the excellent advice given in references 23 and 24. 

Conclusion

Students are required to submit a Free Application for Federal Student Aid (FAFSA) one year before attending college.  Some colleges also require students to submit a CSS/Financial Aid Profile.  The FAFSA and CSS Profile reveal how much a student can pay without borrowing money.  It’s best if the student, with the help of the family, pays without borrowing.  

References

1.  Getting College Credit Before College. BigFuture, https://bigfuture.collegeboard.org/pay-for-college/college-costs/getting-college-credit-before-college. 

2.  Christina Tyman-Wood, What is an early college high school?  https://www.greatschools.org/gk/articles/early-college-high-school/ , 3/7/2016.

3.  Start college early.  Rise Out, Inc. http://www.rise-out.com/start-college-early/ .

4.  Taking Credit: How to Make Sure Your Course Credits Transfer When You Do.  College Affordability Guide., https://www.collegeaffordabilityguide.org/transfer-credit/ .  

5.  Managing College Costs.  College Resources.  https://www.mycollegeoptions.org/Core/SiteContent/Students/Advice/College-Resource-Center/For-Parents/Paying-For-College/Managing-College-Costs.aspx .

6.  10 Ways to Reduce College Costs. Education Planner Org.   http://www.educationplanner.org/students/paying-for-school/ways-to-pay/reduce-college-costs.shtml.  

7.  How to Choose Dream, Target, and Safety Schools.  https://www.princetonreview.com/college-advice/dream-match-safety-schools .

8.  College Affordability and Transparency Center, U.S. Department of Education.   https://collegecost.ed.gov/catc/ 

9.  Mark Kantrowitz, It’s cheaper to save than to borrow,  Saving For College, 4/27/2018. https://www.savingforcollege.com/article/it-s-cheaper-to-save-than-to-borrow .

10.  Mark Kantrowitz, How to save for a child’s college education before the child is born, Saving For College, LLC. College Savings 101, https://www.savingforcollege.com/article/how-to-save-for-a-child-s-college-education-before-the-child-is-born , 4/5/2018.  

11.  Frequently Asked Questions About 529 Plans, ICI Investment Company Institute, ici;org, https://www.ici.org/pubs/faqs/ci.faqs_529.print , 2014.

12.  Tax Benefits for Education.  Publication 970, Tax Benefits for Education, Department of the Treasury, Internal Revenue Service, https://www.irs.gov/forms-pubs/about-publication-970 , 1/31/2018.

13.  Joseph F. Hurley and Brian Boswell, 2018-2019 Family Guide to College Savings, Saving For College, LLC.  www.savingforcollege.com , 2018. 

14.  Robert Farrington, The Smart Way Grandparents Can Help Pay For College, Forbes/Education. https://www.forbes.com/sites/robertfarrington/2014/10/13/the-smart-way-grandparents-can-help-pay-for-college/#69ad07a17927 , 10/13/2014.

15.  Safe Ways for Grandparents to Help with College Costs.  Dowling & Yahnke, LLC. https://www.dywealth.com/resources/blog/safe-ways-grandparents-help-college-costs

16.  Kathryn Flyn, 6 ways you can save for college.  https://www.savingforcollege.com/article/6-ways-you-can-save-for-college , 9/1/2018. 

17. Kathryn Flynn, When to consider a Coverdell ESA to 529 plan rollover.  June 26, 2018. https://www.savingforcollege.com/article/when-to-consider-a-coverdell-esa-to-529-plan-rollover , 10/9/2017. 

18.  Kristina Ellis, Confessions of a Scholarship Winner. Worthy Publishing, Brentwood, 2013. 

19.  Scholarships. College Scholarships Org.  http://www.collegescholarships.org/scholarships/  .

20.  Finding and applying for scholarships.  www.studentaid.gov/scholarships.  

21.  Federal Student Aid, U.S. Department of Education. https://studentaid.ed.gov/sa/.

22.  Matthew S. Rutledge, Geoffery T. Sanzenbacher, and Francis M. Vitagliano. How Does Student Debt Affect Early-Career Retirement Saving?  Center for Retirement Research at Boston College, May 2018. http://crr.bc.edu/wp-content/uploads/2016/09/wp_2016-9_rev.pdf.

23.  Evaluating Financial Aid Consultants.  http://www.finaid.org/scholarships/consultants.phtml .

24.  Deborah Ziff, Decide if you need a private financial aid consultant, usnews;com, https://www.usnews.com/education/best-colleges/paying-for-college/articles/2017-07-05/decide-if-you-need-a-private-financial-aid-consultant , 7/5/2017. 

Copyright © 2018 Douglas R. Knight 

Jim Simon: Financial literacy is America’s Achilles’ heel

My Nov. 7, 2017, inaugural column for The Dispatch, “Civics education in schools needs reboot,” noted there are “loud” and “quiet” crises. An example of the latter is the decline in civic literacy, or basic knowledge of how our government works.

Another and equivalent crisis in the quiet category is financial literacy. For years, numerous polls and studies have revealed how little millions of Americans know about the basics of personal finance and investing.

A 2015 study of more than 27,000 people by the FINRA Foundation estimated nearly two-thirds of Americans could not pass a basic, five-question quiz covering credit, interest, diversification in investing, and inflation. Disturbingly, the percentage of those who passed had fallen from 42 percent in 2009 during the financial crisis.

Results of a survey of six age groups released in January by the National Financial Educators Council estimated that lack of knowledge of personal finance cost America more than $280 billion in 2017.

To compound the issue, we’re living in a consumer-driven society in which spending, especially for immediate gratification, is far more emphasized than saving and investing. The proof: the U.S. household savings rate decreased to 2.90 percent last November, the lowest rate since just before the Great Recession and near the record low of 1.90 percent in July 2005.

 

At a time when the millennial generation, the largest demographic group in history, enters its prime years of spending, saving and investing, it’s critical for that generation, as well as all Americans, to improve their financial literacy, especially before the next recession arrives.

How can poor financial literacy, an Achillles’ heel, be turned into a personal and national strength?

‒ As with physical fitness, financial health begins with good habits, and good habits begin in the home. Surveys have clearly shown that students who talk to their parents about money matters were more financially literate than those who did not. Parents must serve as models for disciplined spending and savings, educating their children along the way about the long-term value of such habits. Instead of lavishing their young with holiday or birthday gifts, they could open a savings account for them and make the first contribution to them to spark a savings mentality. Parents lacking financial literacy can access many online programs, including one offered by the American Bankers Association via its “Teach Children to Save Day” every April.

‒ Making saving as automatic as possible is the best way to build wealth and remove much of the temptation to make impulse buys. Those with little margin for savings can invest spare change through micro-investing apps such as Acorns. Those belonging to 401(k) plans or who have Roth IRAs should have the largest contributions possible deducted from their paychecks after accounting for the payment of truly necessary monthly expenses.

‒ Just as making civics classes mandatory in the classroom can develop more-informed voters, so too can requiring students to master a class in personal finance enable financial literacy before adulthood. Online courses in financial literacy could be customized for different grade levels for secondary schools. Many financial institutions that sponsor and promote financial-literacy programs could collaborate with teachers, quasi-governmental bodies, Junior Achievement, and other organizations to design such courses. A good governmental resource to build such courses can be found at https://www.mymoney.gov, which focuses on “The Five Principles” of Earn, Save & Invest, Protect, Spend and Borrow.

‒ Financial institutions also can educate young investors by sponsoring and promoting social events featuring crowd-sharing tips. Nothing motivates young people more than peer recommendations, and informal, free events featuring financially savvy young adults as ambassadors for financial literacy could be an effective grassroots-based tool. A good opening topic for an informal discussion could be credit scores, which many millennials are extremely interested in building and protecting.

Not coincidentally, April is “Financial Literacy Month,” the time when tax filings are due, 401(k) plans for the previous year must be established and funded and when many Americans receive tax refunds. Given the impact of the tax-cut bill and the opportunity some have for increasing savings in 2018, we have an ideal opportunity to reverse the trend of financial illiteracy and strengthen our financial future.

Jim Simon, is a central Ohio resident and former chief communications off􏰀icer of several corporations.

Reference

Jim Simon: Financial literacy is America’s Achilles’ heel – Opinion ( – The Columbus Dispatch – Columbus, OH, Thursday, 2/1/2018.

Copyright © 2018 Jim Simon