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5 Budgeting Tips for Newly Divorced Single Parents With Children

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Navigating your life after a separation or official divorce can feel daunting and at times, even entirely overwhelming. If you’re a single parent with children, knowing how to budget your money and handle financial decisions independently is essential to ensure you can save money and build emergency funds for when you need them most. The more aware you are of how to budget properly, the less likely you are to find yourself struggling with financial strain even once your divorce is finalized.

1. Consult With Your Lawyer

If you’re going through a divorce, you’ll want to consult with your divorce attorney to determine if you qualify for alimony or, in some instances, even child support. Alimony, also known as a spousal maintenance law, was first introduced in 1997 in the state of Texas. The original alimony statutes remained the same until 2011. Understanding the rights and financial assistance you’re entitled to can help you navigate the process of applying for benefits or alimony from your ex-spouse.

2. Create a Household Budget

Creating a household budget is key to ensuring you stay on budget as a newly divorced single parent with children in the home. Regardless of your current custody status, creating a budget for your household is imperative to avoid spending too much on entertainment and unnecessary products or services. Maintaining a budget will also help you keep better track of your spending habits to determine where you can make reductions and where you can afford to spend more, especially when it comes to taking care of your children.

3. Research Schools

It is estimated that approximately 500,000 children in the U.S. were enrolled in some form of a Montessori school in 2021, according to Forbes. If you’re thinking of moving somewhere new with your children as a divorced single parent, you’ll want to get to know more about the local schools near you and in nearby districts. If you’re considering a private school for your children, you’ll also need to calculate the expenses that will be split between you and your ex-spouse before settling on a decision to ensure you can afford your choice.

4. Consider Medical and Healthcare Expenses

Taking care of medical and healthcare expenses as a single parent can feel daunting if you’re unsure of where to begin. It’s recommended to take your child to a dentist by 12 months old, or as soon as the teeth begin to emerge, according to Stanford Medicine. Research local healthcare options from the government or state for your children if they’re under the age of 18, and you don’t currently have a private insurance policy in your name from your job or employer.

You may also want to communicate with your ex-spouse regarding household healthcare expenses and insurance. If you’re unable to communicate amicably with your ex-spouse, consulting with a family or divorce attorney is best. This will help with mediation and negotiations regarding your children.

5. Adjust Your Spending Habits

As a newly single parent who is recently divorced, you’ll likely need to adjust your spending habits along with your new way of life. Adjusting your budget and spending habits to your lifestyle as a single parent is crucial to avoid overspending or living above your means. Consider budgeting based on your single income and any additional child support or alimony you may receive once your divorce has been finalized.

Discovering new budgeting tips as a newly divorced single parent with children can go a long way in establishing financial stability in your new household. Taking the time to work with an attorney while budgeting and reworking your spending habits can help significantly in protecting your financial assets once you’re living independently again. With the right mindset and budgeting skills, you can maintain your peace of mind while providing for your children even if you’re doing so as a newly divorced single parent.

13 Smart Ways to Save for Your Child’s College Education

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College Education

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Planning for your child’s college education can seem daunting with rising tuition costs, but it doesn’t have to be a financial nightmare. Getting a jump start on savings can ease the burden considerably, and it’s easier than you think with a few smart strategies in place. Let’s explore 13 savvy ways to start stashing that college cash today, making sure you’re prepared when the cap and gown day arrives!

1. Start a 529 College Savings Plan

Start a 529 College Savings Plan

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A 529 plan is one of the most popular ways to save for college. These plans offer tax advantages and the flexibility to use funds for a variety of educational expenses. You can start with a small amount and add to it over time. Relatives can also contribute, making it a great group effort. Plus, many states offer tax benefits for contributions to their own 529 plans, sweetening the deal.

2. Use a Roth IRA

Use a Roth IRA

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Though traditionally used for retirement savings, a Roth IRA can also be a fantastic way to save for college. Contributions are made with after-tax dollars, and you can withdraw contributions (not earnings) tax-free and penalty-free for qualified educational expenses. It’s a versatile option, especially if your child decides not to go to college, as you can still use the funds for retirement. Just remember, there are contribution limits, so plan accordingly.

3. Tap into Education Savings Accounts (ESAs)

Tap into Education Savings Accounts

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Education Savings Accounts, particularly the Coverdell ESA, allow for tax-free growth of investments and tax-free withdrawals when the funds are used for educational expenses. You can contribute up to $2,000 per child each year, but be aware of income restrictions that may apply. ESAs can cover expenses from kindergarten through college, making them a flexible option for long-term education planning.

4. Set Up Automatic Transfers

Set Up Automatic Transfers

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Making saving effortless is key. Set up automatic transfers from your checking to your savings account right after payday. Even small amounts can add up over time, and you’ll hardly notice the money is gone. This “set it and forget it” strategy reduces the temptation to spend what you might otherwise save. Over the years, these automatic savings can form a substantial nest egg.

5. Get a High-Yield Savings Account

Get a High-Yield Savings Account

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For the money you’re saving, why not make it work a little harder? High-yield savings accounts offer better interest rates than regular accounts, meaning your money grows faster. Shop around for the best rates and no-fee options. These accounts are typically very safe, making them a good spot to park your college savings funds. Just make sure you have easy access to the money when the time comes.

6. Redeem Credit Card Rewards

Redeem Credit Card Rewards

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If you’re a savvy spender, look for credit cards that offer cash back or rewards that can be put into a college savings account. Some cards even offer specific education-related rewards. Make sure you pay off your balance each month to avoid interest charges that could negate your rewards. This strategy is a way to make everyday purchases contribute to your savings goals. Just stay disciplined with your spending!

7. Encourage Gifts to College Fund

Encourage Gifts to College Fund

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Instead of traditional gifts, encourage family members to contribute to your child’s college fund during holidays and birthdays. Many 529 plans offer gifting platforms where relatives can directly deposit money. It’s a meaningful way to help build your child’s future education fund. This not only boosts the savings but also helps family members feel they are giving a lasting gift. Plus, it teaches your child about the value of saving over spending.

8. Invest in Mutual Funds or Bonds

Invest in Mutual Funds or Bonds

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For long-term savings, consider more aggressive investments like mutual funds or bonds. While these come with more risk than a savings account, they also offer the potential for greater returns. Start early to take advantage of compounding interest over time. Be sure to consult with a financial advisor to match your investment choices with your risk tolerance and time horizon. It’s all about growing your savings strategically.

9. Save Tax Refunds and Bonuses

Save Tax Refunds and Bonuses

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Whenever you receive a tax refund or a bonus at work, resist the temptation to splurge. Instead, channel some or all of this extra money into your child’s college savings. This “found money” can significantly boost your savings without affecting your regular budget. It’s an easy way to get ahead in your savings plan without feeling the pinch. Every little bit adds to the pot!

10. Cut Unnecessary Expenses

Cut Unnecessary Expenses

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Take a good look at your monthly expenses and identify where you can cut back. Maybe it’s that gym membership you rarely use or the gourmet coffee you buy every morning. Redirecting even a small portion of your discretionary spending into your child’s college fund can make a difference. This practice not only helps in saving but also instills good financial habits at home. Plus, it’s empowering to know you’re prioritizing your child’s future.

11. Utilize Matching Employer Contributions

Utilize Matching Employer Contributions

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Some employers offer matching contributions to 529 plans or other educational savings accounts as part of their benefits package. Check with your HR department to see if your company provides this perk. This could double the money going into the account, accelerating your savings efforts dramatically. Don’t leave free money on the table, take full advantage of this if it’s available.

12. Hold a Yard Sale

Hold a Yard Sale

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Turn your clutter into cash by holding a yard sale. Not only does this clear out space in your home, but it also provides a fun opportunity to involve your child in saving for college. Explain the purpose of the sale and let them help organize and run it. All proceeds can go directly into the college fund. It’s a proactive way to boost savings and teach your child about earning and saving.

13. Apply for Scholarships Early

Apply for Scholarships Early

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Start scouting for scholarships as early as possible. There are scholarships available even for elementary and middle school students, not just high schoolers. Every dollar won is a dollar less you need to save. Keep track of deadlines and requirements, and help your child apply. This proactive approach can reduce the financial burden significantly as college nears.

Cultivate a Culture of Saving

Cultivate a Culture of Saving

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Saving for your child’s college education is a marathon, not a sprint. By implementing these smart strategies, you can build a substantial fund that will help support your child’s academic journey. Remember, the key is consistency and starting as early as possible. Every step you take today is an investment in your child’s bright future.

Kids Eat Free At These 14 Restaurants: A Guide for Family Dining on a Budget

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Kids Eating Out

Eating out with your family can be an enjoyable yet costly affair. For parents seeking to minimize dining expenses without sacrificing fun, finding restaurants where kids eat free is a valuable option. In this comprehensive guide, we present 14 family-friendly restaurants offering free meals for children. We’ll cover options for all meals – breakfast, lunch, and dinner – and provide useful tips to ensure a delightful dining experience for both you and your children.

Enjoy Breakfast, Lunch, or Dinner at IHOP

IHOP

IHOP, a favorite among breakfast enthusiasts, also caters to lunch and dinner preferences with its variety of burgers, sandwiches, and salads. Children aged 12 and under eat free every day from 4 p.m. to 10 p.m. with an adult entree purchase. The kids’ menu includes pancakes, French toast, chicken nuggets, and more.

Denny’s: A Versatile Dining Option

Dennys

Denny’s offers an array of dishes for all three meals. On Tuesdays, from 4 p.m. to 10 p.m., kids aged 10 and under eat free with an adult entree purchase. Their kids’ menu includes pancakes, eggs, burgers, and spaghetti, catering to various tastes.

American Classics at Applebee’s

Applebees

Applebee’s, known for its classic American dishes like steaks and burgers, allows kids aged 12 and under to eat free on Mondays and Tuesdays with an adult entree. The kids’ menu features chicken grillers, macaroni and cheese, and mini cheeseburgers.

Tex-Mex Flavors at Chili’s

Chilis

Chili’s offers a taste of Tex-Mex with its fajitas, tacos, and nachos. Kids aged 12 and under eat free on Tuesdays with an adult entree purchase. The menu for kids includes cheese quesadillas, chicken crispers, and cheeseburger bites.

Casual Dining at Ruby Tuesday

Ruby Tuesday

Specializing in burgers, salads, and seafood, Ruby Tuesday welcomes kids aged 10 and under to eat free every Tuesday from 5 p.m. with an adult entree purchase. The kids’ menu features grilled chicken, pasta marinara, and cheese pizza.

Fun Meals at TGI Fridays

TGI Friday

TGI Fridays, known for its festive atmosphere, serves kids aged 12 and under free on Mondays and Tuesdays with an adult entree. The menu includes chicken fingers, cheeseburger sliders, and macaroni and cheese.

Homestyle Cooking at Bob Evans

Bob Evans

Bob Evans, ideal for family dining, offers free meals for kids aged 12 and under every Tuesday after 4 p.m. with an adult entree. The menu includes pancakes, scrambled eggs, turkey dinner, and more.

Fresh Mexican Cuisine at Moe’s Southwest Grill

Moe's Southwest Grill

Moe’s serves customizable Mexican dishes like burritos and tacos. On Tuesdays after 4 p.m., kids aged 12 and under eat free with an adult entree purchase. The kids’ menu offers mini burritos and quesadillas.

All-Day Breakfast at Perkins

Perkins

Perkins, a bakery and restaurant, serves breakfast all day and features a kids’ menu with pancakes, waffles, and French toast sticks. Kids aged 12 and under eat free every Tuesday after 4 p.m. with an adult entree.

Pizza Hut: A Family Favorite

Pizza Hut

Known for its variety of pizzas, Pizza Hut allows kids aged 10 and under to eat free every Tuesday from 5 p.m. to 8 p.m. with an adult buffet or entree purchase. The menu includes cheese pizza, pepperoni pizza, and chicken nuggets.

Gourmet Burgers at Red Robin

Red Robin

Red Robin offers gourmet burgers and unlimited fries. Kids aged 10 and under eat free every Wednesday from 4 p.m. to 10 p.m. with an adult entree purchase. The menu features cheeseburgers, chicken tenders, and macaroni and cheese.

Classic Diner Experience at Steak ‘n Shake

Steak and Shake

 

Steak ‘n Shake serves classic diner fare. Kids aged 12 and under eat free every Saturday and Sunday with a $9 adult entree purchase. The menu includes steakburgers, hot dogs, and grilled cheese.

Unique Pizzas at Uno Pizzeria & Grill

Uno Pizzeria

Uno Pizzeria & Grill offers deep-dish and thin-crust pizzas. Kids aged 12 and under eat free every Tuesday with an adult entree purchase. The menu features cheese pizza, pepperoni pizza, and chicken bites.

Village Inn: A Cozy Eatery

Village Inn

Village Inn, a restaurant and bakery, serves kids aged 10 and under free every Monday and Tuesday with an adult entree purchase. The menu includes French toast, scrambled eggs, and mini burgers.

Making the Most of Kids Eat Free Offers

Kids Eating Free

To maximize these offers, read the fine print for restrictions, call ahead for availability, tip well for good service, and most importantly, have fun and make memories with your family.

Affordable Family Dining

Affordable Dining

With these 14 restaurants, you can enjoy dining out without straining your budget. Remember to check the offer details, call ahead, tip generously, and enjoy your family time.

We hope this guide helps you save money while enjoying meals out with your family. Share this with friends and family who might also appreciate these deals, and feel free to suggest other kid-friendly dining options in the comments.

5 Reasons Why a Family Boat Is Worth the Cost

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If you live close to a body of water, whether an ocean, sea, or lake, you’re aware of the boating opportunities it offers. While you can always rent a boat, you should consider purchasing one if you have the funds. It may seem like too much of a leap, but here are five reasons spending on a family boat is worth the cost.

1. Boating Can Be a Lot of Fun

Boat owners spend most of their days at sea because it can be thrilling. If you haven’t spent time on the open water, you’ll have plenty of adventures to embark on with friends and family once you get a boat. For example, fishing from a boat is way better than doing it on land because you can go right to the areas with the best fish.

You can also host parties for your family and friends on your boat, where they can join you in the fun of being out on the open seas. It’s no surprise that over 87 million U.S. adults engage in recreational boating! If you’re looking for something to brighten your days, consider investing in a boat.

2. Boating Is a Great Way to Exercise

Most people fail to exercise because it’s not the most enjoyable activity. That’s why 67% of those with gym memberships never put them to use — but the trick is to make things enjoyable.

You can engage in several activities for fun on a boat, which also provides a great workout. These include swimming, snorkeling, SCUBA diving, wakeboarding, and water skiing. Not to forget the joys of fishing. Whether you’re hoping to catch the big one or simply having fun with your casting rod, it’ll help you unwind and concentrate, and it can even end with a delicious supper.

3. Having a Boat Can Strengthen Your Family Relationship

Owning a boat offers a unique opportunity for everyone in the family to participate. As you increase your skill set, challenge your kids to do the same. Together, attend classes at the Power Squadron or Coast Guard Auxiliary, or watch YouTube tutorials on navigation, weather forecasting, or knots. Give your children routine tasks so they can feel part of the boating experience.

The best part is you can carry your boat when visiting different local water bodies. 95% of boats on the water in the United States (sailboats, personal watercraft, and powerboats) are tiny, with a length of less than 26 feet, according to the National Marine Manufacturers Association. This makes them easy to trail to nearby waterways.

4. Potential for a Return on Investment

Nobody can deny that maintaining a boat can get expensive. However, by renting out your vessel for a few weeks or months each year, you can significantly lower the overall cost of ownership. It just takes a few weeks of chartering every year for most yachts to break even.

After that, you can use your yacht for the rest of the year while writing off the expense of upkeep, repairs, depreciation, and even upgrades. Boats retain their value over time, allowing you to enjoy them for years without forking out a lot of money.

5. You’ll Learn New Skills

You’ll need to master new skills to safely operate your new boat, and learning new skills will keep your mind sharp. From anchoring to socking at a marina, navigation to knots, to knowing your stern from your bow and your starboard from your port, the more you know, the more you’ll appreciate your experience. Familiarize yourself with the vocabulary, road rules, the quirks of your gadgets, and the specifics of how to drive in all current, tidal, and wind conditions.

While it can be expensive, owning a boat will open you up to new opportunities and experiences. It’ll also be a great addition to the entire family. This read highlights why a boat is worth the investment.

How to Transfer Assets to Children Before Death

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If you are a parent, you already know it’s important to plan for your children in case something happens to you. One way to do this is by transferring assets to them before you die and in your estate planning. This can be done in a number of ways, and each has its benefits. In this blog post, we will discuss the different options available to you and how each can help protect your children’s future.

Remember: Generational Wealth building isn’t just for parents: grandparents, aunties, and uncles can change the shape of the entire next generation.

Work with A Family Law Attorney and a Tax Planner

family law attorney

There are many different ways to transfer assets to your children, and almost all of them require a lawyer and have tax implications. It is important to consult with an attorney as well as a tax planner, both to choose the transfer structure that is right for you and also to ensure that the documents are compliant with Federal and State property and tax law.

Draw Up a Will

One way to transfer assets to your children before death is through a will. A will is a legal document that outlines how you would like your assets to be distributed after you die. A will doesn’t actually transfer ownership of your assets until after you die, but it can be used to specify exactly who should receive what.

If you have a will, it is important to keep it up-to-date as your life and circumstances change. You should also review it regularly with a family law attorney to make sure it still meets your needs.

One important note: a will is great for establishing your wishes for the distribution of your assets are followed, but it will not keep your estate out of probate. Probate is the legal process of distributing a person’s assets after they die, via the courts in your state. It can be time-consuming and expensive, if you have substantial or complex assets, so many people choose a trust.

Create and Move Assets Into A Trust

will and trust documents

A trust is an arrangement in which one person (the trustee) holds and manages property for another person (the beneficiary). It’s a critical part of estate planning. Transferring assets into a trust can help avoid probate because the trustee can distribute the assets according to your wishes without having to go through the court system.

Moving assets into a trust that can be managed by a trustee will give your children access to the assets when they reach a certain age while ensuring that the assets are managed responsibly.

One common type of trust is a living trust, which is created during your lifetime. You can name yourself the trustee, which gives you control over the assets during your lifetime. Then, when you die, the trust remains in force and the beneficiary can receive the assets without having to go through probate. You can even trigger the execution of your trust before you pass away.

This is a good option if you want to maintain control over the assets during your lifetime, but also want to avoid probate.

Name Beneficiaries on Financial Accounts and Insurance Policies

name beneficiaries

Most financial accounts and life insurance policies allow you to name a beneficiary. This means that the account or policy will be transferred to the named beneficiary upon your death, without having to go through probate. Having updated beneficiaries is the cheapest and easiest way to transfer assets such as retirement accounts, bank accounts, and life insurance policies.

It is important to review your beneficiaries regularly and update them as needed, especially after major life events such as marriage, divorce, birth, or death. This can be especially important for single parents and blended families.

Transfer Assets During Your Lifetime

Another way to transfer assets to your children before death is through a gift or by selling the asset to them for less than its fair market value.

The upside of this option is that you are still around to help them manage the asset. The downside is that lifetime transfers have serious tax implications that vary depending on the value of the asset and your state’s laws.

Gift Assets to Your Children

You can give $16,000 per year, per child (or any other recipient) without needing to file any tax forms or pay any tax. If you are married, you and your spouse can each give $16,000, for a total of $30,000 per child. More importantly, the current (2022) Federal gift tax lifetime limit is $12.06 million per person, and you can also double it if married. While it would require you to file a form, gifts of any size can be given to your children without owing any gift tax, as long as the total amount gifted during your lifetime does not exceed the $12.06 million limit.

Sell Assets to Your Children for Less Than Their Fair Market Value

sell assets to children

You can also sell assets to your children for less than their fair market value. This is The most advanced move, absolutely requires a competent lawyer and tax planner, and is generally most appropriate for family businesses. Generally, this involves a contract in which you sell the asset to your children for an agreed-upon price that is less than the fair market value.

There are a few different ways to transfer assets to your children before death. The most common ways are through a trust, naming beneficiaries on financial accounts and insurance policies, or transferring the assets during your lifetime.

Each method has its benefits and drawbacks, so it is important to discuss your options with a family law attorney and tax professional to choose the option that best suits your family.

Should You Ever Co-Sign on A Home With One Of Your Children

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Co-signing on a home with one of your children

As a parent, it’s normal to want to do everything in your power to help your children succeed. However, when it comes to financial matters – such as co-signing on a mortgage – it’s usually best to take a step back and examine the situation carefully before moving forward. Otherwise, you may put yourself in a bind or damage the relationship. If you’re thinking you should co-sign on a home with one of your children. Here’s what you need to consider.

What You Need to Consider Before You Co-Sign on a Home with One of Your Children

Your Financial Situation

When you co-sign on a home loan. Even if the intention is that your child will handle all of the associated costs, you’re committing to repaying that mortgage. Even when your child takes care of everything as promised, a large loan shows on your credit report. It’ll impact how lenders view your debt-to-income ratio and can affect your credit score in different ways over time.

In some cases, a new mortgage could hurt your chances of getting new financing if you need it or might lead to higher interest rates. Mainly, it’s because lenders have to assume you may be making the payments, which could make you seem overextended.

There’s also the issue of your child missing a payment or defaulting. Since your name is on the loan, their poor financial activity impacts your credit report. Additionally, you’re legally obligated to repay the loan, too. If an adverse situation arises, you may find yourself stuck in a complex legal and financial matter.

Ideally, you need to ensure that you won’t have a need for any new financing personally or that your creditworthiness remains intact even if there’s a new mortgage on your report. Additionally, you need to have the financial means to take over payments immediately if your child is at risk of missing a payment or defaulting. If those don’t apply, then co-signing is dangerous.

Why Your Child Need a Co-Signer

One of the first points you need to examine is why a co-signer is necessary for your child’s loan. Essentially, you want to know why the bank doesn’t feel they qualify – either at all or for a competitive rate – without someone else being on the mortgage.

In some cases, requiring a co-signer isn’t inherently indicative of a significant problem. For example, many younger adults only have a limited credit history. As a result, they may not have a strong credit score even though they maintain good financial habits. It’s simply because they haven’t engaged with enough financial products to show lenders their creditworthiness.

However, if high debt-to-income ratios, a poor repayment history, or something similar is causing the lender to require a co-signer, that’s potentially a different story. When that occurs, there are red flags that your child may not be a responsible borrower, which makes co-signing particularly risky.

How Co-Signing May Impact the Relationship

Co-signing on a mortgage for a child can impact your relationship. There’s a chance you may judge their behavior moving forward, particularly when it comes to how they manage their money or treat the property. A choice that you view as poor could cause hard feelings, especially if it feels as if they’re putting your financial wellness at risk.

However, even if you aren’t actually doing it, there’s a chance your child may assume that you are judging their choices. This could cause them to view the relationship differently, potentially in a harmful way, regardless of how you’re responding to the situation.

In the worst-case scenario where your child misses a payment or defaults, you’re now in a challenging situation. At a minimum, it’s going to lead to a difficult conversation regarding you having to take over the payments. This can create hard feelings, even if paying the debt is within your capability.

On the other side of the spectrum, if you can’t manage the payments either, the circumstances are far harder to navigate. Your credit is hurt because of their actions, and you may end up in collections, with a foreclosure on your record, or other serious adverse actions on your report because they failed to pay. You may view this as a severe breach of trust, and the harm to the relationship could be severe, if not irreparable.

Alternatives to Co-Signing on a Home with a Child

In some cases, there are alternatives to co-signing on a mortgage that could still help your child succeed financially. What option is best may depend on the exact reason they’re considering a co-signer.

If they need a co-signer because they lack credit history, finding a safer way to help them build there’s up might be a better choice. For instance, you could add them as an authorized user to one of your credit cards, allowing them to benefit from your good financial habits. Co-signing on a smaller personal loan that’s easier to take over if something goes awry could also work.

Another option is to provide your child with down payment assistance. That can lower the amount they have to borrow, potentially skewing things in their favor. Each parent can give a child a gift of up to $16,000 (as of 2022) per year without the child incurring any tax-related responsibilities. That can lead to a potential tax-free total of $32,000.

If you’d like to give a larger down payment, then the lifetime gift exclusion may come into play. Since that’s potentially complex, you may need to consult with an accountant or similar financial professional to determine the possible consequences of doing so.

Finally, if you’re financially able, you could purchase the home on your own. Then, rent it out to your child for the monthly mortgage payment amount. If their financial situation later improves and they can purchase the house from you, then they can get a loan, and you can transfer ownership that way. If not, then you potentially have an investment property that you can rent to others or sell.

Should You Ever Co-Sign on a Home with One of Your Children?

Ultimately, co-signing on a home with one of your children is risky. At a minimum, it impacts your credit, often limiting your access to new financing if you would need it.

However, it also puts you on the hook for a large debt. If your child may miss payments or default, repaying the loan is your responsibility. If you can’t do it, then you’ll also face the consequences of going to collections or ending up in foreclosure. Plus, co-signing on a mortgage can put a strain on the relationship.

Now, this doesn’t necessarily mean that co-signing is never a good idea. If you’re able to handle the financial part of the equation without an issue and the relationship is strong, with solid communication, then it may be alright. Just keep in mind that using an alternative may be a better choice, allowing you to offer assistance without taking on unnecessary risk.

Do you think it’s ever a good idea to Co-sign on a home with one of your children? Did you co-sign on a home loan and want to tell others about your experience? Share your thoughts in the comments below.

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The Importance of Being Handy

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The Importance of Being Handy

Perhaps it is just within my circle, but it seems that the character trait or the skill of being handy has lost its value.

People seem unable to fix simple things. Around their house, their car, what have you.

I’m curious if the majority of people know the difference between a Phillips head screwdriver and a flathead screwdriver.

At no time was the importance of being handy more clear than during the last few months, when the entire country went into lockdown. You never know when that service you rely on will be unable to help you.

My Experience

My dad taught me from an early age the importance of being able to fix things yourself and the value of a strong work ethic. Those may seem unrelated, but I believe they are directly correlated.

I watched him and helped him with all of his projects. Plumbing, changing the oil on his car, renovations, replacing his brakes, you name it.

Not only did it save him and us, as a family, money, but it was quality time I got to spend with him. There were valuable lessons taught in those experiences.

Now, I can fix almost anything. It gives me a sense of pride, it saves me money, and now, it’s making me money.

At my last apartment, I was the go-to handyman for our complex. They took a small chunk off my rent and paid me by the hour when I was on a job. Saving and earning at the same time.

Now that I’ve moved, I no longer am the go-to for that complex. Instead, I’m the go-to for all rental units owned by that investor in my city. That’s an incredible opportunity for me to make money outside of my normal 9-5.

Growing up, did I think this kind of circumstance would come upon me? Of course not. But that’s the thing. No matter how you think your life will turn out, it hardly goes that way.

You have to vary your knowledge and competencies across a range of industries. You truly never know what will fall into your lap.

From there, we’re going to take a hard right turn into a different topic

Consumer Math

This is something that should have been on my radar, but it wasn’t. Until this morning. My cousin is taking a consumer math course, and after learning about what it was, I have to promote it.

You can find a consumer math course anywhere, and they all teach the same thing.

Math for real-world situations.

It’s basically a personal finance course. It teaches things like budgeting, taxes, loans, buying a car, wages, deductions, spending, and transportation.

These are topics that everyone should be knowledgeable about, as they lay the foundation for your financial life. Ace these, and you’re steadfastly in the driver’s seat of your finances.

Quick Wrap-Up

Above, we covered two things. Being handy and having a wide range of knowledge can help you later in life, and how having a foundational understanding of consumer math puts you in control of your finances.

Both of these are vitally important but dramatically undervalued by the masses.

Related Reading:

My Life and How I Manage Stress

How to Teach Your Kids About Money

Why Financial Literacy is Important

What is the Coverdell ESA?

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Introducing the last account type on our quest to find the best way to save for college, the Coverdell ESA.

Without further delay, here’s what you need to know about the Coverdell ESA.

What is it?

Like the 529, the Coverdell ESA is an education savings vehicle for K-12 and secondary education. Coverdell ESA stands for Coverdell Education Savings Account.

It got its name from Senator Paul Coverdell, who introduced the legislation for a similar account, the Education IRA. In 2002, a new piece of legislation was introduced to make the account what it is today.

The 529 and the Coverdell ESA share many of the same characteristics, but there are some things that set it apart. All of these will be listed below.

Advantages

  • Savings and investments in the account grow tax-deferred and are withdrawn tax-free when used for qualified education expenses.
  • When it comes time to withdraw, those funds are not considered income, as long as you are using them for qualified education expenses.
  • Can use in conjunction with other education tax credits, like the Lifetime Learning Credit, as long as there’s no double-dipping.
  • These accounts are self-directed, so your investment options are plentiful. They include…
    • Age-based funds
    • Static mutual funds
    • ETFs
    • Stocks
    • Bonds
    • Real estate

Disadvantages

  • Contribution limit of $2,000 per child per year.
  • The funds inside the account are taken into consideration when you file for financial aid. The assets are considered their parents assets.
  • If the money is not withdrawn from the account by the time the beneficiary is 30, they could be subject to taxes and penalties.
    • After 30, the funds inside the account become fully taxable and you’re penalized 10%.
  • Like the 529, contributions to this account are not tax-deductible.

Unique Characteristics

  • Only eligible to families/individuals that fall below an income threshold ($110,000 for single taxpayers and $220,000 for couples who file jointly).
  • The contribution limit is $2,000 per child per year, so even if a family member opens an account for your child, you still can’t go over that number, or there will be a penalty.
  • Qualified expenses include…
    • Tuition
    • Books
    • Supplies
    • Equipment
    • Tutoring
    • Special needs services
  • And can also include…
    • Room and board
    • Uniforms
    • Supplementary and transportation services
  • With a 529, the account owner has control over the assets. Conversely, with a Coverdell ESA, the beneficiary has control.

Conclusion

Effectively, there are three education savings vehicles used today. The UTMA/UGMA, Coverdell ESA, and the 529 plan. I’ve written about the other two in the past so go check those out.

On paper, the 529 looks like the best option, with a high contribution limit, a large number of qualified expenses, and there’s no penalty for letting funds sit for decades.

That is all true, and honestly, I prefer the 529, but the vast, vast majority of people that are helping their children save for college will not come close to the high contribution limit.

The only drawback to the Coverdell ESA is the penalty if the funds aren’t used before 30. Other than that, I don’t think the $2,000 contribution limit is a factor because most people can’t put that much away, anyway. Not without sacrificing their ability to save for retirement, as well.

That said, they’re both great options and you can’t go wrong with either one.

What Is A 529 Plan?

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Education, especially secondary education, is getting more and more expensive. The cost of a 4-year public university has gone up 110% from 1994 to 2014 (Source).

Conversely, wages have grown an astounding 8 times slower than that (Source).

What can you do to save for college? How can you help your kids? Are there certain vehicles that work better than others?

We’ll take a look at one of those in the following article.

What is a 529?

A college savings plan that is exempt from federal taxes, if you use the funds to pay for qualified education-related expenses.

Those expenses include tuition, books, room and board, computer equipment, and necessary supplies for students with special needs, as long as the student is attending at least half-time.

Advantages

  • Funds can be used for K-12, university, graduate school, and trade schools.
  • Parents can withdraw $10,000 per student per year to pay for tuition ONLY.
  • Other people, besides the account owner, can contribute to a 529 plan.
  • If funds are used for the beneficiary you intended, they can be transferred to a family member.
  • Earnings grow tax-deferred

Disadvantages

  • Gift tax exclusions – You are exempt from paying gift taxes if you keep it under $15,000 per individual per year, or $75,000 as lump sum every 5 years.
  • A penalty of 10% will be assessed for funds used on non-qualified expenses.
  • Limited investment options – most plans offer mutual funds as investments
    • Risk-based – Aggressive, moderate, conservative, etc.
    • Age-based – You can select an age-based fund from the get-go, and the fund company will reallocate into new funds as your child gets older.
    • Self-selected

Miscellaneous

  • All plans come with federal tax advantages, but some states offer tax deductions and credits as well!
  • Every dollar in a 529 plan will deduct 5.6% from your family’s need-based financial aid
    • One way around that is to have a family member act as the custodian for the account, so it isn’t in your name
    • However, once the child begins withdrawing the funds and is still attending school, they could have 50% of their financial aid withheld because those withdrawals are considered income
  • You can open one using other state’s plans, besides your own state

Other types of accounts

  • Coverdell ESA – Similar to the 529 in that you use the funds to pay for education-related expenses, However, there is an annual contribution limit of $2,000 per beneficiary, and there’s also an income restriction (once you make above a certain amount, you can no longer contribute to a Coverdell ESA).
  • UTMA/UGMA – Stands for Uniform Transfer to Minors Act/Uniform Gift to Minors Act. I’ve written about this in the past, so if you’d like to learn more, check out the article here.
  • IRA – You can use a Traditional IRA or a Roth IRA to pay for education expenses. Similar to the 529 and the Coverdell ESA, the expenses must be qualified and the student must go to a qualified institution, as indicated by the Department of Education. The most beneficial way to use an IRA is to withdraw the funds from a Roth IRA, but only withdraw what you contributed.

Conclusion

Secondary education is expensive! If you start saving for your kids’ college right away, the compounding returns could really help you save a decent amount.

It’s important to use the right vehicle, and, in my opinion, there’s no better option than the 529.

If you’d like to learn more about paying for college, read this article here. Or if you’re a future or current student that need some finance tips, read this one here.

Be advised: Investments in 529 plans involve risks to principal and may involve additional fees such as enrollment charges and annual maintenance fees. 529 plans offer no guarantees. There are exceptions to the gift tax and estate tax exemptions; please contact a qualified tax, legal, or financial advisor for more information prior to investing.

 

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What are UGMA and UTMA accounts?

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What is a UGMA account? What is a UTMA account? How are they different? What is the purpose of using one over other savings vehicles?

We’re going to dive into those questions and a few others in the following piece.

What are they?

The UTMA and the UTMA are custodial accounts. An adult (the custodian) opens an account for the benefit of a minor.

UTMA stands for Uniform Transfer to Minors Act. UGMA stands for Uniform Gift to Minors Act. The difference has to do with the age of majority, but more on that later.

Characteristics

For all intents and purposes, these accounts are treated the same. As I said, an adult opens the account for the benefit of a minor.

The account itself does not have a limit of how much you can contribute to it, however, there is a gift tax exclusion for the custodian or anyone else that contributes to the account. While I’m here, I should mention that anyone can put money into the account, not just the custodian.

Anyway, the gift tax exclusion is $15,000 per recipient. If the person doing the gifting this amount, they could owe the gift tax.

As far as the age of the majority goes, generally the UGMA is 18 and the UTMA is 21. However, every state is different, so make sure you check to see what the age of majority is in your state.

Prior to the age of majority, the minor is unable to use the funds in the account UNLESS it’s for the benefit of said minor. Once they hit the age of majority, they can use the funds however they want.

Disadvantages

Two of the more common vehicles for education savings are the 529 plan and the Coverdell ESA. Now, I’m not going to go into those two, but they each share one key advantage. Any funds withdrawn for education-related expenses, come out tax-free.

The UTMA/UGMA does not have this capability. What’s more, the taxes on any capital gains made and/or dividends received throughout the year must be paid by the minor.

Also, funds sitting in a UTMA/UGMA, for the sake of the FAFSA, are considered the minor’s assets, and can negatively affect financial aid.

Advantages

There’ve been a lot of negatives so far, and if I’m being honest, there are other savings vehicles available that have more advantages.

The one thing I can think of as an advantage is accessibility.

With the 529 and the Coverdell ESA, any funds not used for education-related expenses are subject to a penalty.

With a UGMA/UTMA, the beneficiary can use the funds for anything that benefits them (while they’re a minor), or they can use them for anything at all once they’ve hit the age of majority.

Conclusion

If you are looking for accounts that are designed around saving for college, then a UTMA/UGMA is not for you. However, if you are looking for an account that is easy to set up, easy to use, and gives you more control, then I definitely would recommend utilizing one.

To make a formal recommendation, I’d go with the UTMA. Again, depending on your state’s rules, this enables you to save more for the beneficiary and prolongs when they can have access to those funds.

If you have any questions about what was said here and for my disclosures, go to my website.

 

If reading this blog post makes you want to try your hand at blogging, we have good news for you; you can do exactly that on Saving Advice. Just click here to get started.