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Freshman Fund: How to Give Your Child a Good Financial Start at College

April 18, 2009

in Money Management

Coming up with the money to pay for college is no easy task. Saving up over the years starting when your child is young makes things easier. But when you have retirement savings and everyday expenses to think about, it may be difficult to find room in the budget to save as much as you’d like to.

Having help from friends and family can reduce the burden of saving for college. In the past, it was difficult for others to make contributions specifically for college expenses. They usually had to send cash or a check and hope that it would go toward college. But with the Freshman Fund, making such a contribution has become much simpler.

The Freshman Fund is a company that facilitates contributions into 529 college savings plans. Parents can create an account for a child and notify friends and family members. When they want to make a contribution, they can easily do so online. Funds are then put into a designated 529 account. If the parents have not yet opened such an account, funds are held in an interest-free account until they do so.

Those who wish to send a gift of college savings can do so even if the recipient doesn’t have a Freshman Fund account. Gift certificates may be sent to anyone with an email address. The recipient can redeem the certificate into any 529 plan. This is a wonderful way to encourage those you care about to start saving for college, and it ensures that the money will not be spent on something else.

College Money for Birthdays and Holidays

More and more parents are opting to discourage traditional gift giving for holidays and birthdays. It seems that most of the gifts end up collecting dust, wasting space and eventually cluttering up landfills. Encouraging friends and family to give money for college is much more practical, especially considering that their gifts will draw interest until your child pursues higher education.

Freshman Fund users can send email notifications to others to let them know how they can make a contribution. They could also add links to the account to birthday party invitations. These are great ways to encourage contributions as an alternative to the usual kinds of gifts.

A 529 plan can help you save the money your kids will need for a college education. And now, it’s easier than it has ever been for people outside the immediate family to pitch in. When combined with family contributions, Freshman Fund contributions can really add up. By the time your child is old enough to go to college, he could feasibly have enough money to pay for tuition, fees and other allowable expenses with little or no outside help.

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What Is a Debt Management Plan?

April 12, 2009

in Money Management

Debt is not necessarily a bad thing. Sometimes we need or want to make a purchase but can’t pay in full up front. Credit can enable us to buy now and pay over time. But when we take on too much debt, it can have a negative impact on our lives.

When debt becomes too much to handle, the first thing we need to do is stop taking on new debt. Then we must find a way to pay off the debt we owe. This can be accomplished with a debt management plan.

In its simplest form, a debt management plan is a budget that focuses on paying off loans and credit cards. It usually reallocates money to make more than the required payment on each debt, allowing us to pay them off more quickly. This frees up more money for savings and everyday expenses and saves us money that would have gone toward interest.

Those who do not have enough money in the budget to increase payments to creditors may choose to negotiate with them. Creditors are often willing to accept reduced payments or lower interest rates for those who are having a hard time making ends meet. They reason that by making terms more favorable to the debtor, they decrease the chances of him filing bankruptcy or simply ceasing to make payments.

Credit counseling services can help debtors establish a debt management plan. They negotiate with creditors on the debtor’s behalf, usually getting lower interest rates and payments than the debtor could have gotten on his own. Once negotiations are complete, the debtor sends one monthly payment to the credit counselor, who forwards the appropriate amount to each creditor.

Credit counseling agencies do charge fees, but they are usually taken out of the creditors’ money. Creditors agree to this because those who participate in such programs are more likely to pay their obligations in full.

Those who participate in formal debt management plans are usually required to abstain from using old accounts or opening new ones until the program is complete. A note also appears on their credit report stating that they are undergoing credit counseling during this time. But when all debts have been paid off, the note is removed and it no longer affects their credit. If you work out your own debt management plan, there is nothing stopping you from obtaining new credit. However, it’s much easier to pay off old debts when you’re not acquiring new ones.

A debt management plan can help avoid bankruptcy by allowing debtors to make payments that fit into their budgets. Creditors benefit because they can collect all or most of the principal owed plus interest, and debtors benefit because they do not end up with a serious blemish on their credit records. If you’re having trouble making payments but could manage if those payments were lower, a debt management plan could be the answer.

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