Kids and Education

Financial Checklist: First Job

June 3, 2021 By Jacki Liautaud

Congratulations! You’ve gotten your first job. Here are some things to keep in mind.

First of all, congratulations! Getting a job is not easy. Creating a resume, interviewing, applications, and more.

Now, let’s get down to business. There are a few things to be prepared for as you start your new job.

Paycheck Withholdings. You probably know this already, but your salary or hourly wage will not actually be the amount that gets deposited into your checking account. The difference between your wage (say, $10 per hour to make it simple) and the amount that goes into your paycheck, is due to expenses that are “withheld” from your pay before you receive the pay. Here are some examples using that $10 an hour wage:
- Federal taxes. Depending on your income and how you complete your paperwork, your employer pays a portion of federal income taxes on your behalf. As an example, let’s say this is 12%, or $1.20.
- State taxes. If your state has income taxes, you’ll probably have a portion of your wage withheld for state taxes. In Illinois, we have a flat 4.95% tax. So let’s say $0.495.
- Health insurance. Does your employer offer health insurance? Your share of health insurance premiums will also be withheld. Typically this is a specific amount per month based on health insurance coverage you elect. Let’s say it’s $400 per month (note that this varies widely so this is just an example), or about $0.25 per hour (40 hours x 4 weeks = 160 hours x $10 = $1600 monthly wage. $400/$1600 = $0.25 per hour). $0.25
- Retirement contributions. Does your employer offer a retirement plan? You may have the option to contribute to that plan which is another type of withholding. See the employee benefits below for details.
- So in this example, we have total withholding of $1.20 + $0.495 + $0.25 = $1.945
- Meaning that you as the employee will receive $8.06 in pay for every hour you work.
Budgeting. Many times, new employees are excited by the pay they will receive but don’t realize what other expenses come along with being an employee, including transportation to/from work, clothing (uniform cleaning, professional clothes, dry cleaning, etc.), and more. Check out budgeting tips here.
Employee Benefits. Your employer may offer different benefits which you should evaluate carefully. If you choose not to participate in the benefits your employer offers, you may be leaving money on the table because often employers will subsidize a portion of the cost. Here are some examples of employee benefits:
- Health Insurance. Can be very costly, and depending on the type of employer and state specific regulations, employers often must pay for a portion of their employee’s health insurance, such as 25% of the cost. So it can be less expensive to get health insurance through your employer than on the marketplace.
- Retirement Plan. These plans come with a variety of names/numbers, like 401k, 403b, 457b. They are all ways for you as an employee to set aside money from your paycheck now, for your future later. Many times, employers also contribute on your behalf. They may contribute an automatic 3% of your paycheck whether you participate or not. Or their contribution level may vary based on whether you also contribute. Check with your employer on what their policy is. Talk to your financial professional about your situation and whether you should participate – these plans can be some of the best ways of saving towards retirement.
- Group Life Insurance and/or Group Disability Insurance. Many times an employer will offer life insurance valued at a set amount like $25,000 or one time your annual salary. In addition you can often add additional insurance onto this that you pay for, called supplemental insurance. Again, check with your financial professional on what levels of participation might make sense for you.
Open Enrollment. Open enrollment is the time your employer gives for you to elect your benefits for the year. Usually this occurs at a set time every year, and often runs for about 2 weeks, at which time you must have selected your level of participation. For some of the benefits I mention above, like your retirement plan, you may be able to adjust your participation levels throughout the year. But for other benefits like health or life insurance, you typically can’t adjust your participation except for the open enrollment time. When you are a new employee, you have a period of “open enrollment” right when you first start. Talk to your employer about what your open enrollment period is, and ask them for help in understanding the benefits you have to choose from if you don’t know what they are.

These are just a few of the practical considerations to keep in mind when starting your first job. And again, congratulations! You’re starting an exciting period of life as you develop your professional life!

Every situation is different, so please talk to the financial professionals in your life before making decisions about how to handle your first job.

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Affording Higher Education

November 12, 2020 By Jacki Liautaud

College comes with a big bill – here are some tips on how to make it more affordable.

$1.6 Trillion Student Loan Debt

The Federal Reserve estimates that Americans held $1.6 trillion in student loan debt as of the second quarter 2020. According to the Investor Education Foundation, nearly 50% of Americans who have student loan debt regret not choosing a cheaper college.

A 4-year college education may cost over $150,000. According to the College Board (link opens in new tab), for the 2019-20 school year, average tuition and fees for a public 4-year out of state university was $26,820, and room and board cost $11,510.

How can I minimize out of pocket costs for college?

There may be actions you can take to minimize your out of pocket costs for college.

Begin saving now. If your student is still several years from college, consider contributing to a 529 plan. These plans are tax advantaged when used for college expenses. After tax contributions are made, but when withdrawn for educational purposes, the growth is tax-free. Take advantage of the time-value of money by starting to contribute when your child is young. Ask your financial advisor for additional details.
Check out this post on giving the gift of education.

For Older Children

Examine your family’s assets. Often, assets in the student’s name are expected to be depleted first towards college expenses. Regarding family assets, typically a parent’s primary home principal and retirement accounts are excluded from consideration.
Look into grants and scholarships which don’t need to be repaid. Many organizations offer special grants and scholarships that your student may qualify for. Ask the guidance counselor at your student’s high school for suggestions.
Complete the FAFSA or CCS financial aid request forms. These forms typically use tax returns from 2 years earlier. If your family’s situation has materially changed since then, you’ll need to complete additional paperwork from the school.
Get a job. Encourage your high schooler to get an after school job. By working on weekends and over holidays, they can save up money towards college, and learn valuable life skills in the process, including time management, responsibility, and hard work.

Discuss Expectations

Maybe most important, have a serious, realistic conversation with your student to discuss expectations with your student before they get their heart set on a school that’s unaffordable. Talk to your student about what your family may be able to contribute towards their college costs.

Many experts recommend only taking out as much in student loans as the student expects to earn in a year after they graduate. Others say future monthly payments should only consume 10% of after tax take home pay. For example, a graduate earning $50,000 might afford a monthly payment of $270, or college debt of about $26,000 at the current undergraduate federal student loan interest rate of 4.53%.

Either way, talk with your student about the cost of college, the implications of student loans, and what’s realistic given your family’s budget and situation.

Get an Associate’s Degree First

A two-year associate’s degree from a local community or junior college is typically significantly lower than the cost of a 4-year school. Students can transfer to a more prestigious 4-year school to complete their degree, while getting the prerequisites out of the way in a more affordable manner.

Consider the Trades

A 4-year college degree is not the best route for every person. Becoming a skilled tradesperson could be a great alternative for some. Mike Rowe, famous for his tv shows and podcasts, started the Mike Rowe Works Foundation (link opens in new tab) to give scholarships to people interested in getting educated in the trades. From their website: “We recognize that a good education doesn’t always require a four-year degree. That’s why we look for people who aren’t afraid to learn a useful skill and work their butts off.”

Let’s get started talking about your goals!

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The Post-Covid Future of Education

October 15, 2020 By Jacki Liautaud

Post-pandemic, what might college education look like and how much might it cost?

College Education in the Post-Covid World

As I write this, we are still in the throes of the Covid-19 pandemic, and it’s early in the school year. Many students of all ages remain at home doing remote learning. But there are also many college students across the country who have returned to campus.

Mounting Financial Pressure

Colleges and universities seem to be facing mounting financial pressure to open up campus, and keep their students on campus even if they are remote learning from their dorm rooms. It’s no wonder. According to the College Board (link opens in new tab), for the 2019-20 school year, average tuition and fees for a public 4-year out of state university was $26,820, and room and board cost $11,510. If school is in session for about 8 months, that’s a monthly cost of $4,791.

College Board also examines how much college expenses increase year over year. According to the same study, public 4-year out of state schools cost of attendance increased by 2.5% from the 2018-19 school year to the 2019-20 school year. In 2019, the average US inflation rate was 1.8% (link opens in new tab), meaning that college costs increased over 38% more than inflation, in just one year.

How can colleges continue having prices like this, if they are only offering remote learning? A major benefit of a college education cited can be considered the experience of living away from home while still in somewhat of a controlled environment – a chance to “practice” being an independent member of society away from your parents. Another major benefit of college is also the relationships students build with each other and mentorships with professors. How can relationships be built in a remote learning environment?

On top of these challenges, and with so many other critical societal and financial factors, fundraising has to be a challenge for many universities at this time. Schools that may have been hanging on before, are now even more impacted since their alumni may no longer be able to support the school with donations at their typical level.

Between a Rock and a Hard Place

So how is a university going to cope? Many schools are discontinuing less popular majors or eliminating whole departments. My alma mater, small liberal arts John Carroll University in Ohio, recently announced (link opens in new tab) the dissolution of the art history department to much student and alumni dismay. But if it’s a choice between eliminating a department or two, vs the whole school being closed, it’s understandable for administrators to choose the latter. But how many of these liberal arts majors can be eliminated before it negatively impacts the entire education offered at the school?

The Future of Higher Education

This New York Times article (link opens in new tab) is from May 2020, and predicts that just a handful of universities will remain after Covid-19 and the move to remote learning. A different perspective, here (link opens in new tab), written by a New York University professor outlines some of the financial impacts felt even by Harvard, but also identifies potential bright spots in remote learning. There are some fascinating and thought-provoking insights to consider, and only time will tell the true long-term outcome of the Covid-19 pandemic on higher education.

It’s too soon to tell, in my opinion, whether remote learning will spark a revolution in how a college education is offered, and the associated costs. But I believe it’s coming.

Let’s get started talking about your goals!

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Maximize College Financial Aid

December 20, 2019 By Jacki Liautaud

In this article, we discuss maximizing financial aid for college.

A child’s college education can be a big family expense

A college education is often the largest major expense outside of retirement for many families. According to the Federal Reserve (link opens in new tab), student loans represent the second-highest consumer debt category behind mortgages, but higher than both credit cards and car loans.

72% of US college students receive some form of need-based financial aid according to the National Center for Education Statistics (link opens in new tab). This is good news, because according to Trends in College Pricing (link opens in new tab) research by the College Board, in about 10 years college is expected to cost over $142,000 for 4 years at a public university, and over $324,000 for 4 years at a private university, including tuition, fees, and room and board. These figures assume an average college cost inflation rate of 5%.

Planning for college expenses should typically start when children are young, so any savings have longer to potentially accumulate compound interest. I wrote another article (link opens in new tab) about some fun ways to contribute to a child’s education savings account.

FAFSA & CSS calculate a family’s expected contribution to college expenses

But what about all the other assets a family has when it comes time to apply for financial aid? Typically, the first step in seeing if a student qualifies for financial aid is to complete the FAFSA, Free Application for Federal Student Aid. Some schools require the CSS, College Scholarship Service Profile. These forms calculate the family’s expected contribution to college.

To complete either form, the family and student must provide many details about their financial situation, such as income, savings, debt, other children also in college, net worth, and more. Each application looks at the previous year’s financial information. So for example, if a student was beginning school in the fall of 2022, the family would fill out the aid form in 2021 based on the 2020 tax return.

Ways to potentially maximize financial aid

Here’s an article (link opens in new tab) which looks at some ways a family and student may be able to maximize financial aid for college by doing things like paying off car loans and credit card balances, moving funds into retirement accounts, and using earned student income over a set limit to pay for things a student would need in college like a laptop, rather than keeping it in a bank account. Typically, assets in a student’s name count towards the amount they will be expected to pay, so it can be beneficial to spend down these assets, like an UTMA account or checking account, prior to applying for aid. For parents, retirement assets and principal in a primary home are typically not counted as assets available for college.

Read the full article here (link opens in new tab). And talk to your financial advisor about your specific situation.

Let’s get started talking about your goals!

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Teaching Kids about Money

December 13, 2019 By Jacki Liautaud

In this article, we consider ways of teaching kids about money.

I often talk with clients about how to teach their kids about money.

I’ve also had many conversations with my husband about ways to educate our son about money. I don’t want him to be spoiled, or overly focused on money. But I do want him to understand that we work hard for the money we earn, and we can’t afford to get every new toy that catches our (his) eye, because we have other things we need to use our money for. I also don’t want him to be constantly worried or thinking about money, because that’s not his job.

It’s a tricky balancing act. And then there’s an allowance. How to do it, whether to do it, how much to give, etc.

I read a couple articles recently that offered up some tips on teaching kids about money.

This article (link opens in new tab) mentions the benefit of paying an allowance (about the amount in dollars of your child’s age), and requiring them to allocate a that allowance by percentage to charity (10%); immediate spending or quick cash (30%); medium term saving such as saving up for a bike or laptop (30%); and an amount towards future expenses like college (30%).

This article (link opens in new tab) gives some concrete examples of how to teach kids about money at different ages. The early childhood timeframe can be an opportune time to start the teaching. The article mentions letting kids mess up, for example, let them regret a spending decision and sit with that feeling. And also, for a child who’s not a natural saver, perhaps offering an incentive to help them save – like matching every dollar they save. And doing it with actual dollars and coins, rather than electronically, can be another way for them to learn.

I’m also reading a good book right now about allowances and how they can be used to teach kids many lessons about money in a very immediate and practical way that can change over time. The book is called The Art of Allowance, by John Lanza.

I’d love to hear from you too; how do you teach your children about money? Click here (link opens in new tab) to post your ideas and tips in the contact us message form.

Let’s get started talking about your goals!

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