Start Saving
Every dollar that you put aside for the future is a dollar you won’t have to borrow – and pay interest on – in the future.As you think about saving, it’s smart to consider how much your education will cost. Your price tag will be determined by tuition, financial aid, living costs, and your financial situation. You’ll want to become familiar with the financial aid process. And it’s important to understand the many college savings options. Read on to learn more.
How do my savings affect financial aid?
Saving for college is one of the smartest things you can do as a family. The more you save, the less you’ll need to borrow. You might wonder whether having savings will hurt your financial aid eligibility. The answer? It’s complicated.
Asset Protection
The Free Application for Federal Student Aid (FAFSA) is a form that looks at how much money your family has. It’s used to figure out your Student Aid Index (SAI), a calculation used to determine how much financial aid you qualify for. Asset protection means that some of your family’s savings and assets are not counted when you file the FAFSA. These assets are “protected,” so they don’t count against you. This can help you qualify for more aid. Many parents’ assets are protected (or not included) in the calculation of your Student Aid Index (SAI). Protected parental assets may include the value of your primary home, retirement accounts, and the value of life insurance policies and annuities. Savings in parents’ and students’ names are counted, up to a limit. Parent and student income is usually the biggest factor in calculating your SAI.
Asset protection allows you to choose the best method of savings for your family. You might choose money market accounts, stocks, bonds, mutual funds, a 529 plan, or a combination. Whatever you choose, saving for college is a positive step towards your educational goals.
To learn more and estimate your financial aid eligibility, visit the Federal Student Aid website.
Should I get a financial planner?
You don’t need a financial planner in order to build a savings plan. But an experienced financial planner may be helpful. They can work with you to make a plan that includes all of your financial goals, including college savings. If you’re considering hiring a planner, check out these tips.
Find a qualified planner with experience in Section 529 plans
Make sure you choose a certified financial planner (CFP) who has experience in Section 529 plans. You can check the background of a certified planner with the CFP Board. Call the Board at (800) 487-1497 to ask for information about the professional.
Ask whether anyone else will benefit
Some financial planners work on a fee-only basis. This means you pay them for their time. Others work for commission, meaning they earn a percentage of purchases and investments you make. Some planners have business relationships or partnerships that might affect their professional judgment while working with you. These ties could cause a conflict of interest, which means the planner might not act in your best interest. Ask them to tell you about any such relationships.
Want more tips and strategies for selecting a financial planner? Visit the SEC.gov page on Checking Your Financial Advisor.