Market Mondays – 9/21/15
Hello and welcome to another edition of Market Mondays brought to you by Legacy Investing & Wealth Management. This week I want to talk about college and saving up if you have little ones like we do. For those of you with nieces/nephews and godchildren there is a place for you here as well. As they used to say in church during offering time; this is a part of the service where everyone can participate..lol. We have a growing national problem and it is called student debt. Some say it is becoming a crisis (similar to the financial crisis in 2008) that we will have to deal with at some point. With college expenses continuing to increase, it’s much more important now than ever before to make sure you have enough saved. Some might say..we can just make sure they get good grades and hope for lots of grants and scholarship money but a lot of times that does not cover all of their college expenses. They could have a 4.2 GPA with every honor under the sun and still not get all the money they need so preparing now is key. Making sure your little ones don’t have to pay their own way through college is one of the wealthy principles and ways generational wealth is created.
So in addition to putting money away in your rainy day fund, retirement, etc., start an account specifically for college while they’re still babies. Put away money every pay day, even if you feel it’s not much. If you do this faithfully, in addition to properly managing those investments, you will have quite a bit saved in 17 years. Any scholarship and grant money they receive will be gravy and maybe you won’t even have to use all of your savings on them. Food for thought…
Another way I’m seeing people affordably go to school is to do their first two years at a community college, then transferring for your last two/three years. If you have several kids that could save you A LOT of mullah! The underlying point I’m also trying to get across is that our kids should not have $100,000 of student loan debt when they haven’t even stepped foot into their new career (most likely paying entry level money!). That is one of the keys to establishing generational wealth and one way of passing it down. This way you can still be alive to see this wealth transferred lol. Who said you have to be dead to pass down your wealth.
There are several types of accounts you could establish to get you started or you could just use a regular brokerage account if you want. The first and most popular is the 529 Plan. This is an education savings plan offering tax-deferred growth and tax-free distributions at the federal level for qualified educational expenses (usually tuition, books, room and board, etc.). This plan allows you to contribute up to the current gift tax exclusion without paying gift taxes. States can tax the plans so understand the rules before opening one. The other type of account is the Coverdell Education Savings Account. The rules are a little different and from the looks of it, the 529 Plan may be more flexible. If you’re interested make sure you understand both so you can go with the plan that makes the most sense for your family.
In market news the Federal Reserve held their two-day meeting last week and decided not to raise the interest rate by .25% as many were hoping they would do. There are many variables that they look at when considering a rate hike and the recent stock market volatility along with slowing growth overseas were some of their concerns about a September rate “lift-off.” Although the US of A is doing OK, not great, raising the rate would have indicated that the Feds felt the economy was strong enough to handle what would have been the first increase in nearly a decade. Rates have been near 0% since the Great Recession and although it wouldn’t have made a big impact on our businesses, psychologically it would have told Wall Street that the economy is getting stronger. Many believe it would have taken some of the volatility out of the market so that we could start moving higher again. Now it appears the increase won’t come until either December or sometime next year. The market sold off on the news and kept selling into Friday.
The S&P 500 ended last week at 1958 after hitting 2020 on Thursday. That’s a big move in two days in case you were wondering. Now with that bearish closing on Friday, it sets us up for further market weakness into this week. The 8/24 low was 1867 and I would not be at all surprised if we trade down that low in the coming weeks. If we hit that level then it could keep right on going to 1820 and below. If we move higher in the short term, which looks pretty unlikely especially after the recent run-up, we could trade back up to 2020 or so.
Money can be made in ANY market so contact us today for a free consultation. Check out our website at www.LegacyInvesting.net for more information. Have a great, productive and prosperous week, and I wish you many happy returns!
Disclaimer – Legacy Investing & Wealth Management LLC or any of its advisers are not liable in any way for any losses incurred through trading by readers of this weekly blog. Any information or strategies of trading suggested here involve risk of capital loss and this weekly blog is not considered investment advice. Individuals who invest in securities are solely and completely responsible for any and every outcome that may occur.