A Digest of Money Management Tactics for the Family Physician

Sending our children to college: It's a classic "rock and a hard place" dilemma for most parents today. On one side, a college degree is a flat-out necessity today. If you care about your kids -- want to give them a leg-up as they start out in life -- you want them to get as much education as possible. On the other, paying for that education can drive you (or your children) tens of thousands of dollars into debt... unless you have a plan.

The Rock: College is expensive. The average sticker price for a college education for freshman in 1993 seeking a degree from a four-year public institution runs more than $31,000, according to The College Board. At some pricier schools, it can top $100,000. That's for one child. If you have two or more, don't expect any discounts. You could spend more to educate your children than you paid for your home.

Worse, you can expect to shell out as much as 300 % more if junior won't be college bound until the next century. Assuming increases of 6 % a year, a child born in 1990 and expecting to head off to college in the year 2008 could end up paying nearly $75,000 for a four-year degree in a public institution.

PROJECTED COLLEGE COSTS (4 YEARS)
FRESHMAN YEAR	PUBLIC	PRIVATE	PRESTIGE
1995	$35,000	$77,700	$113,000
2000	$46,900	$104,000	$151,200
2005	$62,700	$139,200	$202,400
2008	$74,700	$165,800	$241,000

The hard place: College isn't an option these days...it's a necessity. In addition to the "enculturing" aspects of college, there is a direct, proven link between education level and income level. For instance...

• Recent college grads earn $2,116 per month, on average...nearly double the $1,077 earned by their friends who went to work right out of high school, according to the Census Bureau. So, right off the bat, that sheepskin is worth an additional $1,039 a month. Plus, when you figure that a recent college grad will average nearly $25,400 a year versus just under $13,000 for high school grads, that means the cost of college could be paid off in just two years! (By the way, graduates with professional degrees -- including doctors -- average an extra $4,961 per month at graduation.)
  
  
• The disparity continues over time. The median income for households headed by high school dropouts is $18,000, reports the National Center for Educational Statistics. For high school grads, the average is $28,700. For college graduates: $50,500.
  
  

  Comparison of Median Household Income to Education Level
  Education Level	Average Income
  High school drop out	$18,000
  High school diploma	$28,700
  College degree	$50,500

  
  
  
• The difference in average lifetime earnings adds up to about $900,000 ...which makes that sheepskin a pretty sound investment.
  
  

The bottom line: A college education is the best investment your children can make in their own futures. The cost may be steep, but it is the single most important factor in determining their long-term financial security and success.

Figuring out how to pay for college can be an education in itself! Costs being what they are today, college funding requires a strategy...a plan. The challenge: How to put your children through college without going broke yourself...or mortgaging their future to the hilt.

College funding strategies: Whether your future grad is a toddler or a teenager, it's never too late to begin a funding strategy. Too often, however, people wait until their children have already packed for campus. By then, there's not much they can do.

Does it pay to borrow? Not really. Today most people borrow at least a portion of the money needed to cover their college expenses. But that money needs to be paid back...with interest. Whether this debt falls on you or on your children, it can be a crippling burden.

Some parents mortgage their own futures to avoid placing the burden on their children. As a result, many are forced to defer their own retirement plans...while reducing their own standard of living for years to come.

Many children pay their own way. While admirable, this can be frustrating. Imagine borrowing $25,000 at 8 %, with repayment over 10 years. After graduation -- and for the next decade -- your child will have to write a check each month, every month, for approximately $300! By the time the debt is retired, your child will be at least 31 years old...and will have shelled out a total of $36,400, which includes nearly $11,400 in interest.

A better way: Build a college fund ...starting today! The idea is to "own" the money to fund your children's educations, not borrow it. If you begin a regular, systematic accumulation program, that money can be put to work for you, enabling you to earn interest...not pay it.

Whether your child is still in diapers or starting to bug you for the keys to the car, the more you can stash into a college fund -- starting now -- the better. The chart shows how the money can add up.

If your children are already in high school, don't use that as an excuse not to save. Put aside as much as you can. Every little bit helps.

We all muddle through somehow when it comes to helping our children realize their goal of a college education. If need be, we beg, borrow, save, cut back, make do. After all, they're our children.

That's because a college education is too important to leave to chance. Many of us did it ourselves...took on a mountain of debt, lived on tuna fish and popcorn while working our way through college, then med school. We did what it took to get the education. Hopefully, our children won't have to make those kinds of sacrifices. And as long as we are alive and well, we'll manage.

But what if something happens to us? Sure, the odds are against it. But to ignore the risk is to endanger your children's future.

To protect their dreams -- to make sure that your children can afford a college education even if you die or become disabled and your family loses your financial support as a result -- consider the following:

Adequate term life insurance on yourself during your child-rearing days. This should be in addition to your cash value coverage. Even just $100,000 of coverage -- earmarked for support and college costs -- will ensure that your children get a debt-free education in the event of your death. Best of all, a quality term plan can be relatively inexpensive.

Disability income insurance to replace up to 60 percent of your income. If you become disabled, this insurance helps guarantee that you and your family will continue to receive an adequate income. Perhaps more importantly, disability benefits can reduce the possibility of being forced to dip into your own retirement plan funds...or your children's college fund.

For more information about the group life and disability plans available from your Academy, call (800) 325-8166. There's no cost or obligation.

Money is the main bone of contention between college students and their parents. As the cost of college rises -- now topping $10,000 per year on average -- so does the anxiety level in many households with college-age children.

Parents can minimize this stress by arming their college students with solid money management skills. The following guidelines will help prepare your children to pay their own bills...and help you avoid four years filled with financial disagreements:

1. Ease your children into money management as they grow up. Start early, while they still live at home, so you can monitor progress and answer questions. Help them set up a checking account while they're in high school. When they're ready, teach them how to use automatic teller machines and credit cards.
   
   
2. Sit down together and create a budget at the start of each school year. Make it a negotiated, written agreement...as detailed and precise as possible. The budget will help your children become better money managers...and will make you partners -- not adversaries -- in the battle to meet college expenses.
   
   
3. Write a check at the beginning of each semester for the portion of the budget you will cover. Don't give out more money unless it's an emergency...or a birthday. This is the only way your children will learn to pay bills and live on a budget.
   
   
4. Discuss the pros and cons of part-time jobs for extra money and experience. Decide how many hours your children can work without jeopardizing school work.
   
   Money management is one of the most important skills your children can master in college. But their training requires the practical experience gained from mutual decisions. If your children learn real-world lessons about their finances while in college, the real world won't come as quite a shock.

Course description: A survey exploring the ways to get financial assistance to help cover your children's college costs.

Open to: Parents; special consideration will be given to parents of teenagers.

Prerequisites: A desire to educate your children without mortgaging your own future in the process.

Premise: Educating your child begins by educating yourself.

To register: See your child's guidance counselor for details.

Each year MILLIONS of financial aid dollars go begging, while parents remortgage their homes or students mortgage their futures to pay the high cost of higher education. There are literally thousands of different types of aid programs available. They generally fall into three different types of categories:

• Federal, state and campus-based grants worth from several hundred to several thousands a year. This is free money, generally offered on a financial-need basis.
  
  
• Student loan programs, which can take a number of forms...from special rates to special repayment schedules. These are generally only available based on a needs test.
  
  
• Merit and "special situation" scholarships. Merit scholarships have nothing to do with income or affluence level. They are awarded based on achievement. There are performance awards and scholarships for such talents as music or dance, as well as athletic talent. Similarly, special situation scholarships are often awarded based on affiliation in a certain group, etc.
  
  

Unfortunately, many students never receive aid for which they are eligible. A number don't even apply.

How to win the financial aid game:

1. Always apply. Don't assume you're ineligible. This is the biggest mistake many people make. They don't even try. Physicians are especially guilty of this mind set; they assume that their income automatically disqualifies them for assistance. True, as a family physician, you will find that aid dollars aren't lying all over the ground just waiting for you to scoop them up. But it never hurts to apply. And remember, merit scholarships have nothing to do with income. Finally, you might as well apply... especially since a number of other families won't.
   
   
2. Beware of the "Neighbor Syndrome," which is the number one reason most people fail to apply for aid. The worst you can do is sit around over lunch listening to a bunch of other doctors explain how it's just not possible...how they once applied for aid and didn't get any. They aren't experts any more than you are when it comes to finding aid dollars. But you or your spouse may well want to become an expert.
   
   
3. Educate yourself. The application process for financial aid is quite long, quite cumbersome...and very complicated. Plus, you have to go through it every year. But if you are going to win the financial aid game, you must know how it works. You have to educate yourself. This can be more important than grades or income level. Learn what's out there. Explore ALL your options.
   
   
4. Expect to jump through hoops. Eligibility standards and criteria for most aid are set by the federal government. That means you will have to deal with bureaucratic baloney and double-speak. Worse, some of the most intimate details of your finances will be laid bare for scrutiny. You'll have to submit tax records on you and your children, information about your net worth, and more.
   
   
5. Expect to work hard. Keep in mind that chaos and confusion reign; there is no single source of funds or single set of guidelines. In addition to filling out the request forms every year, you and your student may have to request and complete dozens of individual scholarship forms. So, expect to wade through the sea of overlapping rules and government agency double-talk. But it can pay off handsomely. One young woman recently generated several hundred thousand dollars in scholarship money by being determined to leave no stone unturned.
   
   
6. Follow instructions when applying for aid. This is the most common mistake applicants make. Following the instructions to the letter in financial aid forms is crucial.
   
   
7. Be cautious of third-party advisors, including scholarship search services and companies that tie product sales to financial aid advice. They're rarely worth the price. The information they sell is readily available for free at any library or guidance office.
   
   
8. Ask questions. Assume nothing. Getting help can make the difference between getting aid and being turned down.
   
   
9. Talk to a financial aid professional. Your best source of information? High school financial aid offices are good; college financial aid departments are better. Their job is to help students...to help them find college money. And there's no charge.
   
   
10. Don't wait to the last minute. Start talking to counselors while your child is a junior in high school. Many offer seminars to help get you started.
    
    

There are no guarantees that your child will qualify and there is a fair amount of work involved. But you owe it to yourself and your children to explore the possibilities. Begin by checking out the books at the library that describe the many scholarship options available today.