Guide to College Savings

May 08, 2019 | 5 min read N/A

Worried about how you’ll be able to afford your child’s higher education? You’re not alone! With tuition costs rising year after year, many families are concerned with how they can send their kids to college.

According to a Value Penguin report, the average cost for a public, in-state university is over $25,000 per year. For a private college, that cost jumps to over $50,000, including tuition, room and board, and other fees. As a parent, the idea of paying for college is downright nerve-racking. With proper financial planning, however, you can help secure your child’s future education.

At American Savings Bank, we want you to know that you’re not alone in your worries about college. To make this process easier, we’ve put together some tips on different college savings accounts. Use our guide to financial planning for college expenses to save for your child’s future.

WHEN SHOULD I START SAVING FOR COLLEGE?

Like many long-term financial goals, the earlier you can start saving for your child’s college, the better. Every small amount you put towards paying for college contributes to your overall savings.

SAVINGS ACCOUNTS

A standard savings account offers one of the most straightforward methods of saving for college. The benefit, of course, is that a savings account is likely much safer than storing cash elsewhere, such as in your home. With a savings account, the money you put into the account earns interest. Over time, this interest can add up.

A savings account can be a good starting point in your financial planning for college. Unlike accounts dedicated to education funding, a savings account doesn’t have limitations on how the money can be used.

CERTIFICATE OF DEPOSIT (CD)

Much like a savings account, a Certificate of Deposit (CD) allows you to put money into an account that earns interest too. The return rate for a CD is usually higher than a savings account, and your interest rate is fixed, meaning it won’t change during the term of the CD. The major difference between CDs and typical savings accounts is that CDs have maturity terms. When you open a CD, you can choose how long you want to keep the money in the account.

SECTION 529 COLLEGE SAVINGS PLAN

Designed for college savings, 529 plans provide a great way to save for college expenses as part of your financial planning strategy. These plans may offer more risk than a typical savings account because they are investment accounts. The advantage to this risk, however, is the ability to take money out tax-free, including investment gains, for qualified education expenses. Please visit hi529.com.

Before investing in a 529 plan, investors should carefully consider whether the investor’s or beneficiary’s home state offers any state tax or other benefits available only from that state’s 529 plan.

COVERDELL EDUCATION SAVINGS ACCOUNTS (CESA)

Coverdell Education Savings Accounts, or CESA, provide similar benefits to a 529 savings account. Anyone is allowed to contribute to a CESA. That means you can have relatives contribute to your child’s education fund as a birthday or other gift. There are annual contribution limits. The plus side to this is that contributions grow tax-free. You can also withdraw funds tax-free so long as the money is used for a qualified education expense. Money in a CESA must be used by age 30, but any unused funds can be rolled over without penalty to another family member that’s under 30.

CUSTODIAL ACCOUNTS

Custodial accounts under the Uniform Transfer to Minor Act (UTMA) and Uniform Gift to Minors Act (UGMA) are not designed only for college savings. Though the account is set up in your child’s name, you are in control of the funds until your child reaches a certain age (21 for UTMA and 18 for UGMA). Unlike 529 accounts or CESAs, you don’t have to use the money for education expenses. A withdrawal can be made for any expenses that benefit your child.

FINANCIAL PLANNING FOR COLLEGE EDUCATION

If you have young children or are getting ready to start a family, make college planning a part of your overall financial planning strategy. Worried about saving for your child’s future? Speak with one of our knowledgeable American Savings Investment Services* financial planning consultants about education planning. We’ll help you prepare for the cost of college, setting you and your children up for future financial success.

Please consult your tax advisor for more information regarding your individual situation.

*Securities and insurance products are offered through Cetera Investment Services LLC (doing insurance business in CA as CFGIS Insurance Agency), member FINRA/SIPC. Advisory services are offered through Cetera Investment Advisers LLC. Neither firm is affiliated with the financial institution where investment services are offered. Registered address and phone number: 300 North Beretania Street, Honolulu, HI 96817, (808) 735-1717.

NOT FDIC INSURED. NOT BANK GUARANTEED. MAY LOSE VALUE. NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY. NOT A BANK DEPOSIT.

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What Are the Advantages of Building Credit?

May 09, 2019 | 5 min read N/A

Carrying some manageable debt is necessary for building credit. Your credit score has a big impact on your ability to finance big purchases. Knowing how to build credit and maintain a good credit score can help set you up for financial success in the future.

You might think your credit score isn’t important, or that building your score is too difficult to manage. Lucky for you, we’ve included a few tips below to help you build a high credit score – which can be instrumental in helping you buy your first house or finance a new car.

ADVANTAGES OF A HIGH CREDIT SCORE

Unless you have an unlimited supply of cash, a high credit score can help you pay for many of life’s big events. Securing a great interest rate on a loan is a lot easier if you have a credit history and have built a high credit score. There are many different situations where a solid credit score can give you an advantage, including:

BIG PURCHASES

Have you thought about buying a house someday? Or, are you looking to purchase a new car? Both of these purchases likely require financing. Having a high credit score is essential. When you’re taking out a loan for a major purchase, your credit score is used by your lender to determine if you’re responsible enough to pay back the loan on time. Plus, good credit generally gives you access to better loan rates than if you have a bad credit score.

CREDIT CARDS

Much like a loan for a new car, buying a house, or making a big purchase with a personal loan, your credit score affects your approval and interest rates for credit cards. Many credit cards with rewards, for example, require good credit. With a high credit score, you may also be approved for a higher credit limit on a new credit card.

OTHER PERKS TO GOOD CREDIT

While getting the best interest rate available is a great advantage to a high credit score, there are some perks that are often overlooked. For example, a high credit score may help you qualify for lower car insurance rates. Credit is one of the factors that many insurance providers take into account when giving you an auto insurance quote. With good credit, you may also get an easier approval when renting an apartment. Once you’ve moved into that new apartment, a high credit score can reduce or eliminate the deposit you have to pay to set up utilities in your name.

WAYS TO START BUILDING CREDIT

If you’re starting from scratch, building credit can seem almost impossible. To get good credit, you need some form of a loan or credit line. You can use the following strategies to build credit if you don’t have a credit history.

SECURED CREDIT CARDS

Without a credit history, or if you are rebuilding your credit history, it can be hard to get approved for a credit card. Secured credit cards, unlike other credit cards, can be a good start. A secured card requires a cash deposit to open. This deposit is retained as collateral in case you default on payments on your credit card. Generally, the amount of your deposit is your credit limit for your new credit card. Once you’re approved for a secured card, you use it just the same as a regular credit card, making sure to pay the full balance each month.

FIND A CO-SIGNER

Sometimes you may need cash to pay for something when you don’t have an established credit history. When this happens, a co-signer can help you get the money you need and build your credit. A co-signer is someone with good credit who agrees to pay your loan or debts if you don’t make payments. Many young adults have their parents or grandparents co-sign on their loan. As long as you make your payments on time, your co-signer will not be responsible for any of your debts.

A similar method to finding a co-signer for building credit is to become an authorized user on someone else’s credit card. If you’re in college, for example, your parents may add you as an authorized user on their credit card. You’ll get your own card, but your parent will be responsible for paying the bill each month. Many families use this method to build credit for their children. Parents often require their children to pay them back for their monthly purchases.

RENT AND UTILITIES

You may be able to build a positive credit history by making on-time rent and utility payments. There are several companies that allow you to record your rent payments. These are sent to the credit reporting agencies. Several months or years of on-time rent payments can help demonstrate that you make monthly payments reliably.

HOW TO MAINTAIN A GOOD CREDIT SCORE

You’ve finally built up a good credit score, but how do you maintain that score? The most important factor in keeping your good credit score is to make payments on time and in full. If you regularly use your credit card, for example, make sure to pay the full balance before it’s due. Likewise, make your loan payments on time each month. Getting behind on payments can quickly decrease your credit score.

You can also maintain a high credit score by not taking out too many loans or having too many credit cards. Each time you take out a new loan or open a new credit card, you will receive an inquiry on your credit history. Multiple credit inquiries can have a negative effect on your credit score.

LEARN MORE ABOUT BUILDING CREDIT
Building credit doesn’t have to be confusing or difficult. Knowing how to build your credit score can help you establish healthy financial habits for the future. Stop by one of our convenient branch locations to speak with an ASB teammate and start building your credit history today.

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Guide to College Savings

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