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How to pay for your children’s college free of stress and debt

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College tuition is rising steadily. The price of a four-year public university has risen 2.3 percent (1.6 percent for private college), and that is on top of inflation, according to the College Board. Those increases reflect the average of the last 20 years and include tuition, fees, room and board.

Sound intimidating? Good news, these numbers don’t have to be daunting for parents. Having a plan to properly fund these goals is half the battle, and definitely decreases anxiety. Here are some tips as you begin savings for your child’s higher education:

  1. Know the numbers – If only we had a crystal ball to predict exactly what tuition will cost when your child gets to college. We do, however, have tools that can forecast costs and assist in planning. Talk with your financial advisor—he or she will be able to help you estimate and plan for these expenses.
  1. Determine how much to fund – Once you have an expected figure, talk about how much you want to fund. There are differing viewpoints on what percentage parents and children should each contribute to education through scholarships, loans and tuition payments, so discuss this with your family and then set goals based on what everyone feels is appropriate.
  1. Establish investing timetable – The next step is to put your financial goal in writing and begin weighing options on how to achieve the desired savings. Designating monthly or annual contributions to your preferred education savings vehicles is a great way to start. However, you should feel comfortable adjusting these over time on an as-needed basis. Don’t become discouraged if projected savings do not align exactly with the end goal. The most important thing is to consistently save something to ensure the funds continue to grow.
  1. Evaluate options – There are a variety of college savings vehicles available, including 529 Plans and Coverdell Education Savings Accounts. Your financial advisor can make recommendations that are in line with your strategic plan.
  1. Communicate the strategy – When the time is right, start the conversation with your children about their educational paths. Talk about the financial support you plan to provide, and where you expect them to share responsibility. This will help your children begin establishing their own goals and promote accountability for educational expenses as well.

Saving for your children’s college expenses can seem like an overwhelming task, but it is much easier to manage with the right planning and support. Consider these tips and talk with your advisor—those college enrollment packages will arrive before you know it!

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When you click links marked with the “‡” symbol, you will leave UMB’s website and go to websites that are not controlled by or affiliated with UMB. We have provided these links for your convenience. However, we do not endorse or guarantee any products or services you may view on other sites. Other websites may not follow the same privacy policies and security procedures that UMB does, so please review their policies and procedures carefully.

 


Ms. Stokes is a senior vice president and director of Private Banking at UMB. She is responsible for driving sales and relationship management activities. She works closely with the Wealth Management leadership team and regional presidents to grow business and helps to develop roles in wealth management, relationship management and presentation skills. She joined UMB in 2009 and has more than 30 years of experience in the financial services industry. She earned a bachelor’s degree in business administration from the University of Missouri- Kansas City and a Bachelor of Arts from the graduate school of retail banking.



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Debunking credit score myths

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In an earlier blog post, we explained why credit scores are important and how to improve yours. For many people, it can seem as if their score was pulled blindly from a hat. So let’s take a look and debunk a few myths.

Credit Score Myths

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Ms. Stokes is a senior vice president and director of Private Banking at UMB. She is responsible for driving sales and relationship management activities. She works closely with the Wealth Management leadership team and regional presidents to grow business and helps to develop roles in wealth management, relationship management and presentation skills. She joined UMB in 2009 and has more than 30 years of experience in the financial services industry. She earned a bachelor’s degree in business administration from the University of Missouri- Kansas City and a Bachelor of Arts from the graduate school of retail banking.



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Credit Score: understanding the number

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Cholesterol, blood pressure, glucose, credit score…all numbers that mean nothing unless someone explains what is good and what is scary. Just like a doctor breaks down why your cholesterol level should be below 200, we’re here to explain what an ideal credit score could be. And you don’t even have to cut cheese out of your diet.

Your credit score (the most popular being the FICO® Score named after the organization that created it — the Fair Isaac Corporation) can range from 300 to 850 because it’s an adjusted scale. (You get 300 points just for having a credit history…so most adults have a higher score than 300 just by being “on the grid.”) In case you’re afraid to get the pronunciation wrong, FICO is pronounced “f-eye-ko,” like “psycho.”

Why does it matter? If you’re ever going to purchase a house or car or apply for a job, lenders and potential employers will be checking your score to assess your reliability and financial history.

While there are some schools of thought that advise consumers not to obsess over credit scores, the most popular being financial author and radio host Dave Ramsey, the FICO Score is a factor in 90 percent of lending decisions in the United States. And many in those anti-credit score camps still encourage you to be aware of your credit reports to check for errors and work on problem areas.

Most important step: check your score and your reports! Even if you’re worried because of past mistakes with late payments or credit card debt, it’s better to know where you stand and start taking action. No ostrich-like behavior!

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Good news—unless you’re within the 7 percent of the nation with a score between 350 and 549 (and if you are, stop reading this post and call a credit counselor), there is no need to stress. At a score of 550 or more, you can sometimes qualify for a loan. Your motivation for raising it as high as possible will be to get the best interest rates.

Most creditors consider a score above 700 to be acceptable to give a consumer the best rates. If your score is below 700, here are some tips that can help you bring it up. You may be surprised how quickly you can make a change (1-3 years instead of the 7-10 years it takes to start fresh after declaring bankruptcy).

How to raise your score:

1)    Understand how the score is decided

Credit Score Formula

In order of greatest to least weight:

  • Payment history – Did you pay all your bills on time? This includes student loans, car payments, credit card bill, etc.
  • Amount owed – for example, you still owe $10,000 before you can pay off your car, $15,000 in student loans and $500 on one of your credit cards.
  • Credit history length – something positive about getting older! The longer you have a credit history, the higher your score rises.
  • New credit – did you recently open a slew of store credit cards in order to get a discount on a shopping spree? You may be paying for it in the form of a lower credit score.
  • Type of credit used – Credit bureaus look at mortgages vs. auto loans vs. student loans vs. credit cards. Some are better for your score than others.

2)    Stay on top of your bills
The best way to improve on your credit score is to pay your bills on time. Have a steady income and live within your means so your bills don’t pile up until you’re completely buried in credit card and loan debt.

3)    Ask about your custom credit score
Lenders might also look at your custom credit score in addition to your traditional credit score. A lender will use your custom credit score to get a closer look at the risk factors that are related to what you are trying to fund with the line of credit.

4)    Discuss internal credit scoring
Not every creditor is required to report your credit. Some major lenders use their own internal credit scoring systems to help them make a decision. Lenders use these internal scores to predict future behavior of their customers. When you answer questions on the loan application form, the responses will go in to creating a custom score for you.

5)    One size doesn’t fit all
What makes you appealing to one lender will not make you appealing to all. If your credit has been damaged, be sure that any new information is reported to credit agencies.

6)    Pay the minimum
If you can’t pay the entire balance of a credit payment, at least pay the minimum due. Paying the minimum will keep your credit score from dropping even lower than it would if you don’t pay the bill at all.

7)    Keep checking
You have rights as a consumer under the Fair Credit Reporting Act. Check your report (not score) once a year for free at AnnualCreditReport.com‡.

This video from the Federal Trade Commission’s website does a great job at explaining why you need to check your report and how to do it.

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When you click links marked with the “‡” symbol, you will leave UMB’s website and go to websites that are not controlled by or affiliated with UMB. We have provided these links for your convenience. However, we do not endorse or guarantee any products or services you may view on other sites. Other websites may not follow the same privacy policies and security procedures that UMB does, so please review their policies and procedures carefully.


Ms. Stokes is a senior vice president and director of Private Banking at UMB. She is responsible for driving sales and relationship management activities. She works closely with the Wealth Management leadership team and regional presidents to grow business and helps to develop roles in wealth management, relationship management and presentation skills. She joined UMB in 2009 and has more than 30 years of experience in the financial services industry. She earned a bachelor’s degree in business administration from the University of Missouri- Kansas City and a Bachelor of Arts from the graduate school of retail banking.



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The Credit Conversation: Now is the time to talk with your private banker

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Personal lending was a completely different world just a few short years ago. With shifts in the financial landscape, economic uncertainty and low interest rates, this is a good time for you to talk with a private banker and create a financial plan for the future—and the conversation should start with the topic of credit.

What was best for a person five years ago may not be the right choice now. Markets shift, and it’s important to occasionally survey the financial landscape with your private banker and possibly prepare for new opportunities.

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  • Work with advisors, not transaction managers.
    Sound financial planning is built on strong relationships, not individual transactions. Those relationships are built on knowledge and trust. A private banker should be acting as your advisor so they can help you make decisions that fit both your short- and long-term goals. Advisors will focus on tomorrow’s financial decisions, not today’s transaction.
  • Don’t make credit decisions with blinders on.
    No financial decision should be made without knowing the overall financial picture. In a trustworthy banking relationship, your private banker works alongside an entire team of experts to determine the best lending solutions for areas such as investment, tax and retirement purposes while also taking into consideration the overall wealth and estate plan.
  • Create a customized credit plan.
    It’s important to understand all the options. The truth: most people don’t proactively manage the borrowing side of their personal balance sheets when they plan to purchase a luxury vehicle, a business or a second home. That may stem from not knowing all of the varied credit options available.

    A private banker can help you explore and customize lending solutions to match risk and best leverage your assets. This provides you with options that may extend beyond the ones commonly offered in the marketplace.
  • Prepare for the unexpected with a line of credit.
    As the old saying goes, the time to borrow money is when you don’t need it. For example, a line of credit can be an invaluable tool to help you prepare for the unexpected and manage your overall financial picture. 

    Lines of credit can be used for a wide variety of purposes, including major ticket purchases, home improvements, education and medical bills. Additionally, lines of credit can provide you with peace of mind if and when unexpected expenses occur.

As you plan for your future, it’s important to talk with a professional who can ensure you are taking full advantage of the many credit solutions available to you while also providing you with advice related to your overall wealth plan.

When you click links marked with the “‡” symbol, you will leave UMB’s website and go to websites that are not controlled by or affiliated with UMB. We have provided these links for your convenience. However, we do not endorse or guarantee any products or services you may view on other sites. Other websites may not follow the same privacy policies and security procedures that UMB does, so please review their policies and procedures carefully.


Ms. Stokes is a senior vice president and director of Private Banking at UMB. She is responsible for driving sales and relationship management activities. She works closely with the Wealth Management leadership team and regional presidents to grow business and helps to develop roles in wealth management, relationship management and presentation skills. She joined UMB in 2009 and has more than 30 years of experience in the financial services industry. She earned a bachelor’s degree in business administration from the University of Missouri- Kansas City and a Bachelor of Arts from the graduate school of retail banking.



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