What the experts say
‘Buckets’ for college savings
It may feel natural to open new college savings accounts as new kids arrive, but “how many college savings buckets do you need?” asked Beth Pinsker in Reuters.com. Should each child get his or her own 529, or will one do? Experts say it doesn’t really matter “how you slice the pie in terms of growth.” Three accounts with $3,000 and one account with $9,000 will all grow at roughly the same rate if they are invested similarly. Having more accounts might mean paying more in maintenance fees, but children who are far apart in age might require different investing strategies. If you do save everything in one 529, you can “shift the beneficiaries as needed” when it comes time to spend the money. At that point, deciding who gets what becomes more about “family dynamics than accounting.”
The cost of teen drivers
“The financial shock of adding a teenager to a family auto insurance policy is getting less shocking—at least somewhat,” said Ann Carrns in The New York Times. Adding a single teen to an insurance policy still causes annual premiums to increase by an average of 78 percent, or $671. This represents a dip from an average of 85 percent in 2013. That’s thanks to safer auto technology, “graduated” driving programs that put restrictions on inexperienced drivers, and fewer teens getting driver’s licenses overall. Teen drivers can still be tough on family finances; a teenage boy increases rates by an average of 89 percent, compared with 66 percent for a girl. To keep costs low, ask your insurer if you can get discounts for things like good grades or completing a driver’s education class.
Smart student loan payments
Don’t feel pressured to pay off your student loans fast. “What’s more important is paying them off wisely,” said Gail MarksJarvis in the Chicago Tribune. Private loans, which usually come with higher interest rates and stricter terms, should be retired first, by paying more than the monthly minimum whenever possible. Borrowers can afford to take more time with Stafford or Perkins loans from the federal government. Unlike private lenders, “if you run into trouble making monthly payments because you lose your job or your job doesn’t pay enough, the federal government will cut you a break—reducing your payments temporarily.” Despite that flexibility, try to stick with a basic 10-year repayment plan. You will pay less in interest in the long run.