Get my 5-day email funnel that generated $400,000 from a single launch

Want an email sales funnel that's already proven to work? Get the entire word-for-word email funnel that generated $400,000 from a single launch and apply it to your own business.

Yes! Send me the funnel now
Start Here: “The Ultimate Guide to Personal Finance”

Guest post: College students, could your parents save on taxes?

21 Comments- Get free updates of new posts here

0 0

[From Ramit: Yesterday, Todd wrote about what to do before you file your taxes.

Today, this article is specifically for college students. I know, I know. You feel guilty because your parents are paying thousands every semester while you’re busy napping all day and trying to spit game at the girl next door. And failing.

Your parents may be able to save on taxes if they follow some of the instructions below. Take a look and send them this article.]

* * *
Guest post by Todd Doerr

Are you in college or about to attend college? Are you in your junior or senior year? Consider sending this to your parents. This article has a lot of with ideas that may help save your parents thousands of dollars each year and may even put some extra money in your pocket.


I can sense it now. You must be feeling some pride (or bewilderment) that your college student is thinking about how to help you financially and how to make your life a little easier. Who would have thought that your student would start to get a financial clue?

I’ve coached many families who already have college students or will soon have at least one child in college. There are ways to successfully navigate the waters of paying for college. In this article, I will share a game plan with you, the parents, to make your life easier and to help your student get off to a strong start in the real world. I will also provide you with some tax-savings ideas that may speed up your progress even faster.

Let’s first look into the financial future of your college student once they graduate.

Post-Graduation Snowball

As you are probably aware, the typical college graduate has both credit card and student loan debt. Recent graduates have an average of over $19,000 of student loans and over $3000 of credit card debt. The typical graduate degree student leaves with $24,000 to over $100,000 of student loans.

So, your college graduate begins the new season in their life and the snowball builds….

Then, your graduate buys the new car (take it from someone who bought the new car one month after walking the stage – it happens a lot). Another $300 per month in payments out the door.

Then, your graduate rents the nice apartment as they are sick and tired of dorm life or the college apartment. Oh yea, that nice apartment makes the college furniture look nasty. New furniture on the MasterCard – PRICELESS.

Then, your graduate starts making payments on the student loans (sure, the interest rate might be fairly low, but the payment still stinks). Potentially hundreds more of outflow each month.

Then, all of their friends start to get married and everyone starts dropping serious cash on wedding gifts, parties, travel, dresses, and tuxes. The numbers here really add up when you multiply by the number of friends.

Maybe it’s none of these events – maybe they spend $300 per month eating out. Maybe it’s buying cool gadgets. I’ve coached many clients in their 20’s. Their stories are different, but the result is generally the same. The debt adds up quickly and the minimum monthly debt payments grow substantially.


About this time the two big “M-words” might sneak up – Marriage and Mortgages. You get the picture.

The good news is that the snowball does not have to claim your graduate. They can thrive financially if they live off a budget, get out of consumer debt, and avoid going into additional student loan debt.

The best financial coaching advice that I can share with you, the parents:
Help your child graduate with as little or no debt as possible.

Why? Because when they are free of consumer debt and student loans, they can really begin to thrive financially and to build a hopeful future for themselves.

Let’s say your graduate didn’t have that “normal” student loan payment, the “normal” MasterCard payment, those 2 payments could can easily add up to several hundred dollars per month. Instead, he or she invested $300 per month from age 25 to age 65 in a retirement account earning 8% per year. At age 65, they could have approximately $1 Million in retirement savings. Obviously the cost of living will go up, so it won’t feel as big. But it gets them off to a great start towards retirement savings.

Winning with College Expenses
Here is the overall game plan I share with my clients. It does take some work, but it is truly worth it to follow as many of the strategies as possible.

  • Save-Save-Save. If you have time before one of your children heads off to school, save aggressively with an Education Savings Account (ESA) or a 529 College Account, or even just a high-yield savings account. My favorite resource for these 529 and ESA plans is If you are just a couple of years away, I would avoid investing in 529’s or ESA’s as the value could go down if invested in stock mutual funds. I would stick with a high-yield savings account in that case.
  • Proactive Scholarship Hunting. Get proactive and diligent about applying for scholarships and grants, even if your student is midway through college. Don’t give up!
  • It’s possible to find thousand of dollars in scholarships and grants. I recommend Ramit’s postings on these topics. He really knows how to win in this area.
  • Hire a scholarship coach. I send some of my clients to a productive scholarship coach. She consistently helps her clients find $10,000 to over $40,000 of scholarship and grant money.
  • Cash Flow College. As a family, do everything you can to pay for college with cash and to avoid borrowing and credit cards. Here are some ideas to get you started:
  • Part-time jobs for your student, or even yourself. Part-time jobs are a great way for students to develop life and time management skills. They are not forever, and can provide a significant boost for college expenses.
  • Drive used cars. This can really boost your monthly savings. It’s not just a lower payment (or no payment at all if you a big bargain) – older vehicles also depreciate more slowly than newer vehicles.
  • Maximize as many tax strategies as possible for parents. I will cover this in detail later. This step alone can put money in your pocket each year.
  • Become a bargain hunter on everything. Buy used textbooks, used computers, used furniture, etc.
  • Hold off on expensive vacations. This could save $1000’s over 4 years in college.
  • Sell things. Have a massive yard sale. Sell the motorcycle. Sell the piano that no one plays anymore.
  • As a last resort, Student Loans. I’m not going to slam you for taking a student loan, but let’s work REALLY hard on all of the other steps before we start taking these on. The benefits can be substantial.
  • Avoid borrowing or withdrawing from your 401k or IRA’s for college expenses. Even though you can withdraw or borrow money penalty free in specific scenarios from some retirement accounts, you are putting your financial future and retirement at risk.
  • Avoid borrowing on your home to pay for college. Borrowing against your home puts your home at risk, especially in today’s crazy real estate market where people end up upside down on their mortgages.
  • Review Tax Savings Ideas
    Make sure you research every possible income tax savings opportunity – this could save lots of dollars every year of college. By making tax-smart moves, you can free up more money to pay cash for college.

    Here is a list to review that may help to boost your plan. Some are best handled by your personal tax accountant.

    • Maximize your Hope and Lifetime Credits. These are great credits if you qualify – see IRS Publication 970 for details. The Hope Credit may only be claimed for 2 tax years per child and can only apply to the first 2 years of post-secondary education.
    • Deduct Student Loan Interest. If you are already making student loan payments, you may qualify to deduct a certain amount of interest paid on student loans. See Publication 970 for limitations.
    • Continue to Keep Your Student as a “Dependent”. This assumes that you continue to provide at least one-half of their support. Refer to Exemptions in the Form 1040 Instructions.
    • Hire your student. If you are self-employed or own your own business, hire your child to perform bona-fide work at a reasonable salary. Keep records of time worked, duties, etc. You can deduct their wages as a business expense. This is a more complex strategy that probably would best be handled by your personal tax accountant.
    • Buy-off campus housing. This is for wealthy parents only. I recommend that you do not consider this option unless your primary residence is paid for (no mortgage), you have a substantial emergency fund, you have no consumer debt, and have accumulated a large retirement account (Yes, I know this advice is very conservative). You can “hire” your child to be the property manager. You can also potentially deduct the housing property taxes on your Schedule A. This strategy requires a clear game plan – take your time and don’t rush in. Once again, this one is best handled by your personal tax accountant.
    • Make sure your student has health insurance coverage. This is not a tax strategy, but important enough to mention as a “protect yourself from a financial blow-up” strategy. One serious trip to the hospital could set you back from $5,000 to $20,000 or more without health insurance on your student.

    Tomorrow’s article will outline a financial game plan for the newly engaged and the newly married.

    Todd Doerr is a personal finance coach. He helps his clients to rapidly get out of debt and to build serious wealth. He tells his clients, “It’s not always easy or pretty, but it always works.” You may reach him at or at

    1. See the two other articles Todd wrote:

    2. Then check out his eBook, The 2008 Tax Makeover Guide


    0 0

    Related Articles


    How to crush your performance improvement plan

    There are two types of people who stumble onto this page. Either you love your job and hope to crush ...

    Read More

    How to turn negative performance review phrases into a 30%+ raise

    Here’s a dirty secret about performance reviews your HR department doesn’t want you to know. Any performance review, ...

    Read More


    0 0
    1. The best method for me was to work full time while going to school. It helps you avoid procrastination, helps pay for school, and keeps you out of trouble.

    2. Todd, Great post which I can hope would encourage folks to take action now. I am 37 with 3 kids (8, 6 and 4). Fortunately, we pretty much have college covered for the kids because we took advice like this and started early. The time to save for your kids college is now.

    3. I think its great when parents can help with college expenses but don’t do it the first year! I’m amazed at the number of Freshman who blow through their money and their parent’s money partying the first year. They get put on academic probation and get kicked out or start their college career with a horrible GPA.

      I recommend parents let their kids use their savings / PT work for the first year so they “buy into” their education. It is harder to constantly skip class when you know you are paying for it. Parents can do things like pay for insurance, be available for the occasional car payment that is going to get missed, and to give some extra spending cash around the holidays and vacations.

      Then after the student has been forced to mature and take school somewhat seriously, the parents can start covering more of the cost. It helps establish good fiscal habits living on a shoestring budget.

    4. Dan, that’s really a great idea. I never thought of that.

    5. I’m 22, am in a relationship but not married, and I have no kids. In reading this site and others, I wish I had started saving before I was born!

      I mean, there is so much to save for! Emergency funds, college for me, general savings, college for my kids (who aren’t even born), my wedding, vacations, retirement…the list gets bigger every year it seems! These days I look at every extra bit of income as a potential savings opportunity. I’m finding that I have to remind myself to have some fun with my money, too.

      Todd- great post, much better than yesterday’s, I think. This is much more like the quality I’m used to reading on this site. I’m going to forward this to some new parents I know that are interested in saving for college. Well done!

    6. Ramit, I think Todd’s articles are great. I am looking forward to tomorrow’s post.

      Actually I have a response to Seth. Yes, I feel the same way.. There is so much to save for. I’d like to share advice I got from a friend, that I have found very helpful – Put some money away in a CD for 4 months. Although the interest rate isn’t great, it allows you to put money away, and forget about it. My problem in the past has been withdrawing money from the savings account for silly expenses, just because it is available. When the CD comes to renew, I add another few $$’s and roll it for another 4 months. It’s a good way to set aside a month’s rent or mortgage payment in a monthly CD, and keep it ‘just in case’.

      I hope this helps. I just wanted to share this advice, as I found it very helpful. Ramit, thanks for your great posts. Keep it up 🙂

    7. @Puneet-

      I like your tip about the short term CD savings ideas. One thing I learned along the way and love is the idea of starting a CD ladder, i.e. – setting up a series of CDs that ultimately continue to mature on a regular basis. About a year ago, I started buying 6-month CDs every month for 5 months, setting interest to reinvest in the CD automatically. By the sixth month, the first CD was ready to be reset. Now, every month I have a CD that resets automatically and I don’t have to contribute any additional funds on my own. And the great thing is that if I do need to dip into savings, I can just let a CD expire any given month… so it’s fairly liquid savings at a decent short-term savings rate.

      I wouldn’t recommend this strategy for long-term investing, but it’s great when I’m planning to save for something significant within the next 2-3 years.

    8. Thanks, Mike. I especially like your idea of a CD ladder. I think I will try to implement that myself. Yes, CDs are a nice way to build savings in the short-run. Thank you for sharing, Mike.

    9. A quick question for those students eligible for student aid (subsidized loans and grants): How does this increase income/increase savings affect your eligibility for financial aid. I mean, if the government is going to give you the money to go to school anyways, shouldn’t you be spending that time doing worthwhile things instead of scraping together every cent you can?

      The reason I ask this is that when I went to school, I got slammed because I saved most of the money from my high school job. I walked out of school with the same amount of debt *and* with nothing to show for my savings.

    10. Good ideas. I enjoyed this post. And even though I don’t have kids yet, I’ve thought about setting up a college fund and slowly funding it for when I do have someone to send off to college. Even if I don’t end up with any kids, the money could still be used for myself or anyone else I know, which is a huge plus.
      On another note, to discuss further what Dan mentioned, I don’t have any kids yet, but the discussion of paying for college comes up with the people I work with and my friends that have kids.
      I think I’m going to let my kids assume they will be paying for school (I would save for it in secret), so they are more likely to look for scholarships, grants, etc. They can also take out loans if necessary. After they have finished, then I’ll offer to pay off their loans. While they’re in school I would help them with books and some other expenses, but tuition would be their burden. I agree with Dan that this gives them a sort of buy in and since they’re paying for it they would be more likely to try to get something out of it. In fact, maybe doing this for the first couple years would be more appropriate, so their final two or three years they don’t feel like they’re being crushed by debt.
      I’ve also kicked around the idea of a reimbursement system similar to a company that pays for school. 100% for an A, 80% for a B, 50% for a C, and nothing for a grade below a C. If they had to pay up front and knew they could be reimbursed, maybe they would try harder?