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Saving for Your Child’s Education Without Going Broke

The cost of higher education seems to spiral upward every year. Here’s what you need to do to be financially prepared when your child heads to college.

Start early
The average cost of earning a four-year degree could top $205,000 by 2030, according to some estimates. Amassing that kind of cash takes time, so it’s important to begin saving as early as possible, perhaps even right after each child’s birth. The combination of consistent saving, compound interest and investment returns can add up to significant growth over the years.

Explore options
While any investment can be earmarked for college expenses, some savings accounts are designed for this purpose and can provide tax advantages as well:

529 plans
Run by states or schools, 529 plans like the Oregon College Savings Plan let you save for a kid’s college costs with the money’s earnings growing tax-free. While there’s no deduction from federal taxes for contributions, that benefit is fully or partially provided by many states. There are no income or contribution limits, but the money has to be used for a designated beneficiary’s education expenses. Also, gift taxes may apply if you contribute more than $14,000, including any other gifts, to the recipient in a given year.

Coverdell Education Savings Accounts
Formerly known as Education IRAs, Coverdell Education Savings Accounts are trust funds that pay qualifying education expenses for a designated beneficiary. Contribute up to $2,000 annually until the beneficiary turns 18, then use all funds for education before the child reaches 30 years and 30 days old.

Contributions aren’t tax-deductible, but interest and returns earned are tax-free as long as the money is used for qualified educational expenses. To be eligible, your taxable income must be under $110,000, or $220,000 for those filing jointly.

Invest by age
Saving for college parallels retirement planning in that an aggressive investment portfolio, weighted with growth stocks, is recommended during early years with a shift to more conservative assets such as municipal bonds as the time approaches to start withdrawals. Start with equity and stock index funds and begin to adjust the mix once your child turns 9 by putting new contributions into less volatile things like muni bond funds. At 14, begin moving the money out of equities to beef up bond holdings, and aim to be completely out of stocks and equity funds by the time your child starts college.

Better late than never
Saving from an early age is best, but what if you missed that chance? These strategies can help you catch up:

  • To reduce costs, consider enrolling your child in a community college for the freshman and sophomore years
  • Explore available grants and scholarships
  • Keep adding to 529 plans after college expenses start
  • Have your child check out work-study and part-time campus jobs
  • Federal student loans can provide more favorable rates than private lenders

Further stretch your dollars by taking advantage of education tax credits. To avoid being disqualified, pay the first $4,000 of qualified college expense out of pocket before tapping into 529 funds.

With today’s tuition costs, a gap often remains even for those who’ve had a savvy saving and investing strategy coupled with scholarships and federal loans. If you don’t have enough for tuition, check out programs offered by financial institutions and private lenders like Sallie Mae. Look for loans that don’t have application or disbursement fees. Some institutions, like USAgencies Credit Union, participate in loan programs that have competitive rates, flexible payment terms and don’t charge prepayment fees.

With a little planning, research and creativity, your child can earn that diploma while you keep your financial health intact.

© Copyright 2016 NerdWallet, Inc. All Rights Reserved

 

If you have questions about navigating the student loan process, USAgencies can help. Give us a call (503-275-0300), shoot us an email, or just stop by. We’d love to talk!

(Oh, and Oregon residents… we should also mention the Oregon Promise. It’s a great resource for certain Oregon students planning to attend community college.)

 

What’s the Difference?

Auto Dealer vs. Credit Union Financing:
What’s the Difference?

Here’s a quick Q & A with our Lending Supervisor, Callie Gibbs, on the benefits of getting pre-approved with USAgencies before you set foot in the dealership, and what to do once you get there…

Q. What are some of the benefits of getting pre-approved before shopping?
A. When you get pre-approved with us our loan officers work hard to make sure you are educated before you go shopping. We do our best to put you into the lowest rate and most comfortable payment possible. You help decide what your loan will look like, instead of someone else putting you in a box. Ensuring your loan is here means you get personalized service from beginning to end.

Q. What does the pre-approval process look like at USAgencies (if I’m buying from an auto dealership)?
A. You can simply apply online anytime of the day or night, or call us during business hours for a quick decision. Once approved, we do offer an Auto Check. That is a “blank” check good for up to your approved maximum. You just write it out to the dealer as if you were paying cash. Once that check clears our account, we call you and finalize the terms of the loan. We also now have the option of electronically signing your loan documents to make the process as easy as possible.

Q. What if the dealer tells me they can offer me a better rate? Should I take it?
A. A better rate isn’t always as good as it seems. The dealer wants to find you financing because they GET PAID for that. We don’t believe that we should have to buy our members’ loans. We want to EARN your business through excellent service. Even 0% interest really means the price of the car is increased to begin with; nobody gives money away for free! Besides that, if you are already pre-approved, and the dealer offers you a better rate than we have, check with us first. We always quote a base rate up front, and sometimes we have discount options available.

Q. What if my credit is less than stellar? Should I assume that the dealer is the only one who can finance me?
A. Absolutely not! We have a great loan program for our members with “less than stellar” credit. If your initial rate is over 5%, every year that you pay us on time, we automatically reduce that rate by .50% (until it reaches 5%). This will not only reward you for on time payments, but also take a lot of time off of your loan, saving you money!

Q. Should I take the dealer warranty/GAP?
A. This is NOT recommended. Here at USACU we offer all the protection that you need: Add-On Warranties, GAP, and Debt Protection for Loss of Life, Disability and Involuntary Unemployment. We want you to feel secure in knowing that your loan, credit, financial well-being and vehicle are protected. The dealer offers some of these things as well, but at a much higher cost… and, their little secret is the more the finance person can get you to pay, the more they put in their own pocket!


For more Q & A with Callie, you can contact her directly:

Callie Gibbs, Lending Supervisor, USACU

Callie Gibbs

Lending Supervisor
Certified Financial Counselor
cgibbs@usacu.org
(503) 275-0312

 

Get a Jump on Back-to-School with this Quick Checklist

Although it’s mid-summer, and school may be the farthest thing from our mind, it’s a great time to get a jump on that back-to-school checklist. Those lazy days of summer have a tendency to slip quickly by, leaving you in a mad dash to get everything done in time. Why not head into fall prepared and confident that your student is ready to go, making the transition from summer to school is a smooth one?

Here are a few tips for getting back-to-school ready:

  • Assess where you stand.If you set a financial goal to save for school expenses as a New Year’s resolution, now is a great time to check in on that progress. Ask yourself: How much have I saved? Am I on track for my goals? Or am I behind? Not quite where you thought you’d be? Talk to one of USAgencies’ Member Service Reps about tools that can help you save, including account alerts, direct deposit, or which savings product might help you best reach your goals.
  • Ensure your student has access to funds. For some students, this may be their first time with their own bank account- others may be old pros. Whatever the case may be, getting your student set up with an account from USAgencies will ensure they have many ways to access the funds they need. With everything from our easy-to-use mobile app, to Shared Branching, to the thousands of surcharge free ATMs across the country, your student will be sure to be able to connect to their money when & where they want. One feature parents especially enjoy- account-to-account transfers inside Online Banking.
  • Keep track. Using credit and debit cards can sometimes make it easy to lose track of what you spend. Using a budgeting program–like MoneyMark from USAgencies’ Online Banking–can help you stay on track of your monthly expenses. You can even use the Cashflow Calendar feature this July & August to win some extra cash! Learn more about how this promotion can help you stay on track of money coming in and going out, plus even help bring in a little extra if you win!
  • Check in with your school’s financial aid office. All schools have different requirements when it comes to financial aid. Make sure that your school has an updated version of your FAFSA and that everything is in order for the upcoming school year so your student’s financial aid is not delayed.
  • Refinance to a lower rate & help save. If you haven’t checked in with USAgencies to see if we can reduce your auto, home or credit card rate, it’s worth a look. Reducing your interest rate can save you hundreds of dollars over the life of your loan. Contact us to see how we can put more cash in your wallet at the end of the month.
  • Explore transportation options. Car, motorcycle or bike, USAgencies can help your student get wherever they’re going with a low-interest loan, flexible terms and easy-pay options, like direct deposit. Your Credit Union has an Aspire Auto Loan option for those with little or no credit, too. A transportation loan could be a great way to help you get your student’s credit history started on a positive note.
  • Look into a responsible private education loan. As college costs continue to rise, more students are in need of private student loans to fill the gap financial aid doesn’t cover. USAgencies partners with Sallie Mae to offer the Smart Option Student Loan to help cover education expenses. With the Smart Option Student Loan, you can take advantage of some of the lowest private education loan rates in the nation, and you can choose repayment options to help pay off your loan faster than with a conventional private loan.
  • Check out a low-interest Signature loan. If your student needs another resource for paying for the ever-rising cost of books, school supplies, athletic gear, etc. consider applying for a low-interest unsecured personal loan. This July & August, USACU is offering a loan special on Signature loans – with up to 1.25% off already low rates! Learn more here.
  • Consider asecured Visa card for those unexpected expenses. The credit limit on a Secured Visa Gold card is protected by funds in your savings account — it’s the perfect tool to help students establish good credit. Have a student with a little more credit history? Check out our Visa Platinum card- it offers rewards (1 point for each $1 in purchases) that you can use towards travel, merchandise or a better interest rate on a certificate or auto loan with us. Another benefit of the Visa Platinum- USAgencies invests 5% of the net income from our Visa Platinum cards into charitable giving programs. Last year we contributed almost 21 thousand dollars to back into the community that we serve. Learn more about our Community Giving Program

Many don’t want to start thinking about back to school already, especially in the midst of these beautiful long summer days. However, back to school finances can creep up on you quickly, so planning ahead pays off. This list is a good starting place, but if you should need any help along the way USACU, your Trusted Financial Service Provider of Choice, is here to help you in any way we can. Give us a call or stop by, and we can help you make back-to-school a breeze this year.

Do you have any savvy back to school shopping tricks you use to save money every year?

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Pre-Qualification vs. Pre-Approval

Pre-Qualification vs. Pre-Approval

You may have heard of these terms before, but maybe you don’t necessarily know the difference between the two, or for that matter, what either one of them really mean. Below is a short description of each and how both can benefit you as you make your way through the home buying process.

Pre-Qualification

Pre-Qualification is the process of determining how much money you will be eligible to borrow based on an initial interview to exchange essential financial information, including your income, savings and debts. A credit report is not needed.

By “pre-qualifying” you are not only made aware of the general amount of money you’ll be able to borrow, you will also learn about your current financial situation as it relates to purchasing a home. You will also be given tips on how to change or improve your financial status, if needed, to better meet your home purchasing goals. You’ll also learn about specific loan programs that you are qualified for and that will help you meet these goals.

Pre-Approval

Pre-Approval is the act of becoming conditionally approved for a specific home loan, prior to finding and making an offer for a home. The dollar amount submitted for approval is based upon your personal level of comfort, not to exceed an amount that is likely to be approved.

Documents that you must submit in order to obtain this service include*:

  1. Income: One month of pay stubs & two years of W2 forms.
  2. Assets: Previous two months’ worth of savings, checking and retirement account statements.
  3. Credit History: A credit report, which will be used for a mortgage transaction.

Once we receive the necessary documents, a completed loan application and all other required disclosures needed for a home loan can be produced. Typically, within 24 to 48 hours a “conditional loan approval” (commitment to make a loan) can be issued in the form of a letter that can be presented to real estate agents and sellers as evidence that you are ready and able to purchase a home.

Let’s Talk!

To find out what you can be pre-qualified and/or pre-approved for, USACU is here to help:

  • Questions? Contact Steven Raymond, our resident mortgage expert, via email (sraymond@usacu.org) or phone (503.275.0329). He has over 30 years of experience in the industry & loves to talk mortgage.
  • Ready to go? Apply for a mortgage online now.

 

*On a case by case basis more documentation may be needed to provide evidence of additional income, assets or debts.

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Cut Tax Time Stress with These Quick Tips

Key Tax-Preparation Tips to Cut Stress

Although it comes around every spring, tax season tends to inflict the same headaches year after year. To reduce your stress — and maximize your refund — it’ll help to stay organized and be aware of recent changes to the tax code.

For additional motivation to get on track, keep in mind that the average refund has been about $3,000 in recent years. Even if you don’t expect to get that much back, there are plenty of ways to put a refund to good use. But first, you’ll have to file your returns properly, taking advantage of any deductions you might qualify for. Here’s a look at where to get started.

Compiling the necessary information

For starters, you’ll need your W-2 form listing earnings and tax withholdings, which employers typically send out in January or early February. Be sure to have your Social Security number or taxpayer identification number available, as well as those numbers for any dependents you’ll claim. You’ll also need documentation of any income they may have had.

Affordable Care Act penalty

The 2010 Affordable Care Act ushered in one of the most significant tax law changes in recent years. It stipulates that if you didn’t have health insurance for more than three months in 2015 and didn’t qualify for an exemption, you may face a penalty.

For tax year 2015, taxpayers who lack adequate insurance may be penalized at either 2% of a portion of their income or $325 per adult and $167.50 per child, to a maximum of $975 per family — whichever is higher. Those fees are set to increase in upcoming years, which means it’s a good idea to get insured as soon as possible.

Tax deductions reduce taxable income

Deductions reduce the amount of your income that you have to pay taxes on. Sit down and figure out whether the standard deduction or itemized deductions will work best for you. The former is a set amount that reduces your taxable income depending on your filing status; the latter lets you list qualified expenses separately, such as mortgage interest and local property taxes. If your itemized deductions add up to more than your standard deduction amount, go with that.

So what kinds of expenses can you deduct? Contributions to eligible organizations and interest on education loans are among the more well-known deductions you can take. Others, such as medical and home office expenses, aren’t as widely used for various reasons. Make sure to look into which of your expenses you can use to reduce your taxable income, which will probably increase your refund. Bear in mind that income limits and expense thresholds may limit these deductions or eliminate them entirely.

If you qualify to contribute to a traditional individual retirement account, or IRA, you may be able to shield up to $5,500 of income from taxes — plus $1,000 more if you’re 50 or over — by putting it in an IRA. You have until April 15 to make deductible contributions for the previous year. Withdrawals are subject to income tax, however.

Also, if you’re in a same-sex marriage, stay alert for further changes in the rules governing your tax status and other financial issues.

The bottom line

Completing your tax returns won’t be much fun, but it’s the first step in claiming a refund. Once you’ve filed your returns, you should expect to get what you’re due within three weeks — or in less than half that time if you ask for the money to be directly deposited to a savings or checking account. Just remember to compile all the essential paperwork before getting started, keeping an eye out for tax credits and changes to the tax code.

 

 

© Copyright 2016, NerdWallet.

USACU does not provide tax consulting or advising services. For specific tax advice, please consult a certified tax consultant.

Get Creative! Ways to Lower Holiday Spending

From our friends at BALANCE

Holiday spending is often a budget-buster.

The expenses can be numerous: presents, wrapping paper, cards, decorations, food, and travel, to name a few. Yet in these tough times, few people have thousands of dollars to spend. If you do not have the funds to buy everything you want, there is no need to despair. A little bit of creativity and energy can get you through the holidays without draining your wallet.

Gifts
Why spend $75 to buy a scarf if you can knit it yourself with $15 yarn? Making your own gifts is a great way to save, since supplies usually cost less than the finished product. Not only are homemade gifts cheaper, but many people appreciate them more than store-bought gifts because of the effort that goes into making them.

Are you not an experienced crafter? No problem. Writing a letter describing what the person means to you or framing a memorable photo are ways to give personalized gifts without having to break out a glue gun. Baking is another option that is easy for most people to do. Standard cookies or brownies can be dressed up with sprinkles and ribbons in holiday colors.

Offering your services is a great cost-saving gift, since it only costs time. Why not offer a free night of babysitting to your sister with three kids or a month of lawn-mowing to your parents? Think about what service you want to offer, and create a coupon that the recipient can redeem at a later date.

Gift-wrapping
Now that you have taken the time to choose economical gifts, you probably do not want to spend $50 wrapping them. Skip the fancy wrapping paper and bows, and look around the house to see what you can use. Do you have a newspaper? (The comic section is an especially suitable choice.) Computer paper? Shopping or supermarket bags? Cheap craft supplies, such as glitter and paint, can be used to decorate plain surfaces.

Cards
It is not uncommon for store cards to cost $4 apiece – or more. If you sent cards to 20 people, that would cost you $80, not including postage. Creating your own cards can help you save, but resist the temptation to buy the pricey supplies that pepper the scrapbook aisles of craft stores. If you create and send cards electronically, you avoid spending money completely. You can make your own or use one of the many free services available on the Internet. If sending electronic cards is not your thing, consider trimming your mailing list. You can probably skip sending cards to your third grade teacher and the second cousin who you never see.

Decorations
Like with gift-wrapping, you can avoid buying decorations by seeing what is lying around the house. Making a garland out of popcorn is a classic holiday decoration. Pine cones and acorns – available in abundance in many parts of the country – provide a perfect seasonal touch. If you are really craving store-bought decorations, consider waiting until after the holidays to buy. Most stores will be selling them at a deep discount, and you can use them next year.

Food
If you host holiday dinners or parties, you may find yourself spending a significant amount of money on food. Potluck dinners are an easy way to shift the burden of buying all of the food off of you. However, if you do not want to ask your guests to bring food, there are other options. Consider eliminating a full dinner and just providing appetizers and desserts or avoiding expensive items, like meat and wine. Look for where you can buy the cheapest food. Often bulk stores are cheaper than regular supermarkets, but not always.

Travel
Airfare is generally more expensive during the holidays, since that is when everyone flies. If you want to celebrate with far away family, why not have a “holiday” dinner during an off-peak time of the year, when airfare is cheaper? Whenever you fly, being flexible can usually help you save – you probably won’t have to spend as much if you fly at night or have a layover.

You do not need to spend a lot of money to have a good time. By being creative with your purchasing and not straining your finances, you can not only celebrate during the holidays, but afterward as well.

Holiday Shopping Safety Tips

Whether in-store or online, it’s the time of year where we all need to be diligent about protecting our finances.

Here are some safety tips from the Northwest Credit Union Association (NWCUA):

In-Store Purchases:

  • EMV chip cards provide an extra layer of security when you buy on site (not online). Not all merchants have caught up with this technology trend. Ask the merchant if they have the chip system in place. If they don’t yet support it, use your card but continue to monitor your transactions daily. Take advantage of your credit union’s online account monitoring services. Report any suspicious activity to your credit union immediately.
  • Be sure your card is returned following each purchase and that it is indeed your card.
  • Wait for the card receipt. Never leave it at the checkout counter, and keep receipts with you; not in your shopping bags.
  • Check your statements and watch for multiple or incorrect charges. Compare receipts to your account statements, and then destroy your receipts.
  • Report unauthorized transactions to your credit union immediately.
  • Keep a list of your card account numbers and telephone numbers to call if your cards are lost or stolen. Keep that list in a secure place.
  • Make sure you have signed your credit and debit cards. Do not write your PIN on the card!
  • When entering your PIN, block the keypad from the view of the cashier or other customers.
  • Know that your PIN can be stolen in other ways. There is a heat signature left on non-metal keypads for several minutes after you use it. Infrared cameras installed on Smartphones can be used to measure this heat signature and obtain your PIN. Stop this fraud by resting your fingers on other keys while typing in your PIN.
  • Running your card as credit rather than debit is another way of protecting your PIN.

Online Shopping:

  • Use a secure Internet connection.
  • Do not use public wireless networks for online purchases.
  • Shop on sites with https:// in the URL, and be sure that an icon with a lock appears to the left. The “s” stands for “secure” and indicates communication with that site is encrypted.
  • Type the merchant’s address directly into your browser; avoid links.
  • Use complicated passwords with at least eight characters. Include numbers, special characters and upper and lower case numbers.
  • Keep the antivirus and security software updated on your computers and mobile devices.
  • We recommend that you don’t store your payment information. Many websites or apps let you store your credit and debit card information for convenience, but this might also be too convenient for thieves.
  • Do not respond to pop ups, and do not share card information via email or texts.
  • Set up payment and purchase alerts via text and email. If you notice suspicious activity, notify your credit union immediately. 

The Northwest Credit Union Association is the not-for-profit trade association representing over 160 of Oregon and Washington’s credit unions and their 5.2 million members. The NWCUA is the voice of the Northwest credit union movement, providing legislative, regulatory and public advocacy in addition to education, compliance, networking support and business solutions to credit unions. For information on how to join a credit union, please visit http://www.asmarterchoice.org.