Lao Voices

As I was talking to my co-workers, two that have children attending college this year and realize that they were not prepared as far as how they would pay for their son’s and daughter’s college education. This really surprised me, and both had to borrow money from their 401k, which they don’t have a lot in there to begin with, so what will they have left for their own retirements, not a whole lot I’m afraid.

Thinking back now, I recalled that both thought that their children were so smart that they would get a full scholarship plus more, which I’m not sure what. I think reality finally sinks in, yes both are smart, but smartness is not the only criteria for getting a full scholarship, and there are many smart kids out there. I recalled that when I was growing up, I had to find my own way if I want better education, but I would not expect the younger generations to endure the same struggle such as myself, if to tell my story, it would appear as if I’m telling the story that most parents told to their children that they had to walk 5 miles in snow, rain or shine to school, the story of the stone age I would imagine.

I realize that there are a good number of Laovoices readers that have young children and might benefit from this topic; it is never too early to start thinking and planning for your children’s education, the earlier you start saving, the better. I think most people would think in term of saving accounts or CDs. This is not a bad idea but I think the money is too easily accessible and might not be there when your child is ready to go off to college, plus saving accounts earn so little interest, and CDs do earn a bit more interest but the problem is that you can’t add more money to it, and having to open another one each time; how many CDs will you have to open before your child goes off to college, might be one too many, think of all the time that you have to spend at the bank, not something to look forward to IMO.

There are many different types of saving plans out there for college education, but the one that I like best and read about is the 529 plans. A 529 college savings plan is a very simple way to save money for your kids’ (or anyone else’s) college education. The benefits are tremendous. Here are some of the heavy hitters:

• You pay no taxes on the account’s earnings.
• The child doesn’t have control of or access to the account — you do.
• If the child doesn’t want to go to college, you can roll the account over to another family member.
• Anyone can contribute to the account.
• There are no income limitations that might make you ineligible for an account.
• Most states have no age limit for when the money has to be used.
• If the child gets a scholarship, any unused money can be withdrawn without paying any penalty (just the tax).

The 529 plans are considered the parents’ asset so they don’t adversely affect financial aid eligibility. It is managed very much like your retirement account, the earlier you start for your child, the better because this is considered a long term investment that needs time for your money to grow, I’m thinking that you can start as early as birth or 1 years old, this I kid you not.

The reason that I say that you can manage this like a 401k retirement is because the younger you child is, the more risk that you can take to yield a better return, and as your child gets older, reaching the age of 14 or 15, then switch it to a more conservative portfolio because it’s almost time for him/her to use the money (similar strategy as your 401k, more risk when you are young, switch to a more conservative portfolio when closer to retirement age,) also you wouldn’t want to contribute any more money into the 529 plans because your money will no longer grow, but put it in saving accounts or CDs instead, mainly for future spending money.

I know most Lao children get money for their birthdays and this might be something that you can put back for your child as part of his/her college education savings. To learn more about this, you can talk to your local banks or financial advisers; this will save you a lot of worry and headache when the time comes.