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Saving for college is kind of like dieting—it’s something you should do, but it’s oh, so hard. Like many difficult tasks, saving for college may be best done with the advice of an expert.
Northwestern Mutual, the life insurance company, recently conducted a study of African American parents to learn how they save for college. The insurer learned that African American parents do the following:
- Work side jobs to earn money that is earmarked for saving
- Start relatively early—before their child is 10
- Solicit savings help from grandparents and others
Unfortunately, fully 35% of black parents plan to rely on loans to fund some portion of their child’s college education costs.
I spoke with Francisca Brown, Northwestern Mutual director of African American market strategy, to learn more.
“Sixteen percent of African American parents were saving for college using a 529 plan,” Brown told me. “But, 13% were using money market accounts or certificates of deposit.”
Brown suggests that African American parents come out ahead if they work with a financial planner who can guide them to the best vehicles for saving.
“African American families don’t talk about money,” Brown says, echoing a sentiment I’ve heard before. So how can black parents effectively save when money is a taboo subject?
“You can do it right, structure a plan,” Brown says, by working with a financial planner. Northwestern Mutual financial planners do not charge a fee; they earn money by their commissions on the financial products they sell you.
But doesn’t that incentivize them to sell products that the client doesn’t need? Brown says no.
“It has to be about the client and the client’s needs.” Northwestern Mutual is a major life insurance company that would discipline advisers who didn’t act in the client’s best interests.
Some Northwestern Mutual financial advisers offer services in churches or through Jack and Jill, an African American family and social organization.
“We want to help African Americans learn about financial tools, the basics of saving, financial institutions and banking, and life insurance policies,” Brown says. “Our advisers meet the client where they are and grow with the client.”
Some steps advisers use to work with clients:
- Asking questions to see where clients are financially
- Helping them with legacy planning
- Developing a unique plan that suits the client’s needs
- Informing clients of their options
- Making sure clients are protected
“With the right plan in place,” Brown says, “it is possible to save for college and still meet other financial goals.”
To learn more about Northwestern Mutual, visit its website.
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