“Personal Finance: Before college, kids and parents must have the money talk - Sacramento Bee” plus 1 more

Personal Finance: Before college, kids and parents must have the money talk - Sacramento Bee

Posted: 29 Aug 2010 12:08 AM PDT

When it comes to getting ready for college, Annie Peabody's got it all together: colorful new bedding and bath towels, shower caddy and storage bins, an e-reader, a netbook and a bike.

And although she's heading to a pricey, prestigious university, the Stanford-bound freshman is no pampered princess.

Leaving home for the first time, the 18-year-old West Sacramentan is clear on what college will cost and what she's going to contribute.

Peabody and her parents – Dad's a civil engineer and Mom's a high school math teacher – had the talk already.

"My end of the bargain is that I pay for all my own expenses during the school year, like concerts, clothes and groceries," said Annie, who's worked for minimum wage this summer for an ophthalmologist and in her dad's engineering office. "They'll pay for the tuition, room, board and books."

And when she arrives at Stanford, the biomechanical engineering major will work a part-time job – probably at a Starbucks, she figures – as part of her financial aid package.

Adds her mom, Julie: "Once she gets there, we don't intend on giving her extra money. Anything extra she wants – tickets to a football game or clothes beyond what she takes – that's all on her."

That's the kind of family discussion that financial experts say should be mandatory before kids leave the nest.

Especially now. Despite the continuing cloudy economic forecast, one thing is crystal-clear: College costs continue to climb. And it's made many students acutely aware. In a recent Fidelity Investments online survey of U.S. high school seniors, a majority said saving for education was "overwhelming." Good news for parents: 94 percent of students were willing to pay for at least some of their college costs; 56 percent of those said their share should be half.

This month, as thousands of Sacramento-area college students leave home for the first time, financial experts say keeping a lid on costs begins with a conversation. And the approach is critical.

"It's a conversation, not a lecture," said Geoff Howard, a financial consultant with the Charles Schwab office in Roseville. Make it collaborative but focus on key points, he suggests. Among them:

• Talk about needs vs. wants: Needs are textbooks, tuition. Wants are snowboarding trips and the newest iPod.

• Decide who pays for what. It's personal to every family, but everyone should be clear so there are no bank account surprises mid-year.

• Drill down to specifics on expenses. Use a budget worksheet; many universities offer them online through their financial aid office, or go to websites such as www.bankrate.com or cashcourse.org.

"It's an eye-opener and if done right can be the first real conversation parents have with their children about money," said Howard. "It's a chance to start good habits right now."

For families like the Peabodys, it's meant not buying lots of fancy new college accessories. Annie's parents figure they'll spend about $18,000 for their daughter's freshman year at Stanford. That's after deducting her financial aid and a tiny scholarship from Stanford's annual $50,576 tab for tuition, room and board.

The $500 Annie and her mom spent on dorm life necessities was carefully doled out. They bought sheets on clearance at Pottery Barn. They used coupons and checked the specials at Target, Ikea and Bed Bath & Beyond. The Christian Brothers High School graduate got a bike as a graduation gift because she isn't taking a car to campus. Her Costco printer and laptop are several years old but "still work great." And she's planning to rent textbooks for her Sony e-Reader, rather than buy pricey hardbacks.

For any college-bound student, here are other money matters to consider:

File it away

Creating a financial filing system is a must. Websites like Mint.com let you create a budget and a financial record-keeping system. Or simply label a series of file folders: bank account, ATM receipts, bills, cell-phone contract, health care.

When you need the paperwork, it's not buried under a pile of books or gym socks.

Credit cards? Maybe

College students and credit cards have long been a hot topic. Eager to clamp down on aggressive soliciting by credit card companies on college campuses, Congress this year banned anyone under 21 from obtaining a credit card, unless there's a co-signer or the student can show his or her ability to make monthly payments.

If you're willing to co-sign and feel your student is responsible, it can be a great way to launch their credit history while they're still under your financial wing. And a credit card can be a lifesaver in an emergency – the unexpected-flight-home type, not the late-night-pizza-run kind.

But a warning: If you co-sign and your adorable teen racks up too many overdrafts or late payments, your credit history can be dinged. And vice versa: Your bad habits could hurt your child's credit history.

Michael McClure, a Rio Americano High School graduate heading to Santa Clara University next month, figures he doesn't need a credit card. The 18-year-old worked full time all summer at an auto tire distributor and saved about $2,000 – which is tied to a debit card.

"It's working out fine because I can go online and know exactly how much I have. There's a cool app on my iPhone that tells me how much is in my account. … When I wanted to buy concert tickets to Rock the Bells, I checked to see if I could afford it," McClure said.

Another option: prepaid, reloadable cards. They're like a credit card, but you can't overdraft or spend beyond your limit. Companies like American Express, Visa and MasterCard offer them. Compare several to check fees or restrictions, such as out-of-network ATM withdrawals.

Just-in-case documents

It's the scenario no parent wants to envision, but your son or daughter may want to consider authorizing someone to make financial and health-care decisions on their behalf, in the event of a accident or hospitalization.

For students 18 and older, Sacramento estate planning attorney Trudy Nearn recommends three documents: a financial power of attorney, an Advance Healthcare Directive and the medical records release form known as HIPAA. The health-care directive states who can make medical decisions on your behalf; the HIPAA form says your medical records can be shared with whomever you designate.

The financial power of attorney would give a parent or other designee permission to make or postpone loan payments, talk with lenders and landlords or access bank accounts, if a student is incapacitated.

"It's just peace of mind for parents that they will be able to help their kids and be involved if something happens," said Nearn.

In most cases, she said, students designate a parent, but siblings, grandparents and family friends also can be named.

Leaving home for college is a life-changing event for kids and their parents. Doing a little financial prep can be healthy for everyone.

"You love your kids and while they're at college, you want to minimize their stress and distraction, like a late bill or a bounced check," said Schwab's Howard. "Those are what will keep kids from focusing on their academic and their personal development, which is what college is all about."

Have a personal finance question? Contact The Bee's Claudia Buck at (916) 321-1968.

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Personal Finance: Only buyers will drive more hiring - Philadelphia Daily News

Posted: 29 Aug 2010 12:08 AM PDT

Posted on Sun, Aug. 29, 2010

What's stopping small businesses from hiring?

One popular story line of the recession is that small businesses, which employ about half the workforce, are afraid to hire because they don't know what health-care reform and tax changes will mean. Based on that narrative, some stock market observers predict that the November election will be a turning point - erasing uncertainty about politics and at last freeing the stock market to climb.

But analysts who have delved into business decision-making are shooting holes in that assertion. They see a simpler truth.

Unless companies see customers showing up in greater numbers, hiring is not going to materialize, said J.P. Morgan Securities Inc. economist Gabriel de Kock.

"A shift in the balance of power after the November congressional elections will have a very modest sustained positive impact on economic growth and job creation, unless such a shift drives policy change that directly boosts aggregate demand," he said. "By the same token, while risk markets could bounce after the election, any broad-based gains may be short-lived."

Demand is the driving force

To test the assertion that taxes and other political factors are weighing down employment decisions, de Kock analyzed surveys of small-business owners by the National Federation of Independent Business the last 37 years.

"The results are unambiguous," de Kock said. "They overwhelmingly indicate that weak demand, rather than government policies, accounts for firms' reluctance to expand."

That has been true historically and recently. As he dug into small-business sentiment since 2005, he found that taxes and regulation drove only 12 percent of the reluctance of small-business owners to expand, while weak demand accounted for 87 percent.

In other words, to use a slogan from the Clinton-Bush election, de Kock concluded: "It's the economy, stupid! And only about (one-sixth) is: It's Washington, stupid."

That leaves scant hope for a quick uptick in hiring.

According to de Kock's research, small businesses respond primarily to the economy when deciding whether to buy equipment such as computers or hire employees.

Jacques Eddy, a Heartland Payment Systems Inc. manager who advises restaurants and other small businesses, said that "what stops business from hiring is sales. If they think they can move to the next level and get more business by hiring, they will do it."

Most, he said, have been using incentives to attract customers and are not hiring yet.

One firm that hired

Still, Ashley Bolivar, sole proprietor of Magnetic Marketing Solutions in Chicago, recently hired the first two employees for his Web-development business.

"I was scared to death to hire help in this economy," he said. "But since the business growth was there, I did it."

Despite recent concerns about the economy, Morgan Stanley economists David Cho and Richard Berner say more companies appear to be willing to spend on new equipment than on new employees. In a recent survey of analysts, the firm found that 39 percent think companies will boost fixed investment over the next three months and one-quarter expect payrolls to expand.

Only 5 percent said uncertainty over health care made companies reluctant to hire. About 20 percent said uncertainty over taxes was prompting managers to hesitate on any expansion.

Larger concerns for the businesses included stock market volatility, finding potential employees with the skills needed, and fear that investors would sell the stock if companies expanded.

Cho and Berner said in a report: About a third of the companies that had announced expansions took a hit on their stock prices as investors sold shares.

"Investors want managers to be disciplined stewards of their capital and will punish undisciplined corporate behavior," the economists said.

Gail MarksJarvis is a personal-finance columnist for the Chicago Tribune. E-mail her at gmarksjarvis@tribune.com.

Personal Finance

Sunday, August 29, 2010