The top five financial mistakes parents make
September 29, 2009 · Tagged with Family and Home
Without a will, the state decides who cares for the deceased’s children and who manages their finances. When parents put their wishes in writing, they make those decisions instead.
If finding the money for attorney fees is the biggest hurdle, at least have a conversation with aunts, uncles and grandparents regarding who will take responsibly of the children in the event that a parental death occurs, Brooks said. And put those decisions in writing.
“If money is that tight, at least spend the 10, 15 bucks at the stationary store and fill in the blanks,” he said, referring to premade will documents. Remember to have the document notarized, he added.
4. Forgetting to save for retirement
“When you’re young and you have kids, retirement seems so out of reach,” Osuch said. “It’s something you can do tomorrow.”
But delaying retirement saving makes it harder for a nest egg to grow. And remember college savings can be supplemented with student loans. “There are a lot of ways to finance college, but no one is going to give you a loan for retirement,” she said.
Neglecting retirement savings also doesn’t do any favors for grown children, who could be faced with the burden of financing their parents late in life, Maton said. At the very least, people should put as much money in their 401(k) plans as their companies will match, Osuch advises.
5. Putting off saving for college
Save for college while saving for retirement, Osuch said; starting early allows more time for the fund to grow. But dedicate fewer dollars to school than to the retirement fund.
If, for instance, someone has $100 a month to save, he or she should put $75 into some sort of retirement plan and $25 into college savings, she said. “Most people do the opposite or don’t put anything into retirement at all.”
But even though financial aid can supplement college savings, don’t count on receiving aid that doesn’t need to be paid back.
“Fifty-six percent of financial aid is in the form of loans,” said Jennifer DeLong, director of college savings plans for AllianceBernstein. “People hear ‘financial aid’ and they think ‘free money.’”
And although it’s easy for proud parents to picture their prodigy as a star athlete or coveted artist, don’t plan on them financing their entire education with scholarship money.
In the AllianceBernstein study, two-thirds of financial aid administrators said they believe that scholarship and grant dollars are less available for the average family today than they have been in the past; 92% said that parents overestimate the amount of scholarship and grant money their children will receive.