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Should Parents Pay for College?

As a parent, you want what’s best for your children. So as they start to grow up, you might be wondering, “should parents pay for college?” The answer to that question, unfortunately, isn’t cut and dried. While doing so can help your child avoid student loan debt, it can have long-lasting consequences on your financial security.

This is far from an exhaustive list and, and we think it goes without saying that what might be right for your unique situation may not be right for someone else and their family. But if you’re thinking about whether you should help your child pay for college, here are some pros and cons to consider.

Why Parents Pay for College

The average student loan debt for Class of 2018 graduates was $29,800 . While it’s possible for your child to reduce how much they have to borrow through scholarships, a cheaper school, and earned income, it may not be easy.

Giving Your Child a Head Start

Graduating with tens of thousands of dollars in student loan debt is never fun, especially if your child’s first job doesn’t pay as much as they’d like.

Parents paying for college can help their children gain a smooth transition from college to real life without the stress and anxiety that comes with a crippling debt burden.

Helping Your Child Stay in School

College can be expensive, and if the bill gets too high, some students might be tempted to drop out altogether. By helping your child pay their way through school, you can help ensure that they stick it out until they earn their degree.

Allowing Your Child to Focus

Getting a job can help your child cover some of their tuition costs, but if they have to work too many hours, it can make it difficult for them to focus on their studies. If you’re paying for their education, they have a better chance of getting good grades and possibly qualifying for academic scholarships. They may even be able to take on a bigger course load every semester and graduate early.

Why Parents Don’t Pay for College

While there are some compelling reasons why parents paying for college is a good idea for some, there are others that may cause you to think twice.

It Could Threaten Your Retirement

If you can afford to save for a healthy retirement and pay for college, you’re in good shape. But if you feel like you have to choose between the two, paying for college and not saving for retirement could force you to work longer or leave the workforce with less money than you might need.

Student loans aren’t ideal, but on the other hand, there’s no such thing as retirement loans to help you get by.

Your Child May Not Do as Well

Your child may be more willing to work hard in school if they have skin in the game. In other words, they may not value the experience as much as if they were paying for some or all of the costs associated with it.

It’s a Good Teaching Moment

Helping your child figure out their college financing and teaching them good financial habits now can help them continue those habits long after they graduate. If you cover everything for them, they may have a difficult time transitioning to life after college and may end up coming back to you for help.

How Parents Paying for College Can Get Financing

If you’re seriously considering helping your child pay for college, there are a few different options you might have.

Current Income and Savings

If your income is high enough or you’ve built up significant savings in a 529 plan or another account, you can use those funds.

Parent PLUS Loans

The U.S. Department of Education offers PLUS Loans for parents that you can qualify for as long as you don’t have an adverse credit history. Parent PLUS Loans give you access to certain benefits, including the income-contingent repayment plan and generous deferment and forbearance options. However, they also charge relatively high interest rates and upfront loan fees.

Related: Should You or Your Child Take Out a Loan for College?

Private Student Loans

If you have excellent credit and a strong, steady income(and your child doesn’t qualify for enough federal aid), you may be able to qualify for a student loan with a private lender. Typically, you can get prequalified with a soft credit check with many lenders online to see what rate you qualify for and compare it to other lenders and Parent PLUS Loan options.

Financing Options for Your Child

If you’ve considered the question, “should parents pay for college?” and decided against it, your child still has several options for paying for their education. Here are just a few.


Whether or not your child gets an academic, athletic, or other type of scholarship from their school, they can still get more money from private organizations. Websites like Fastweb allow your child to search millions of scholarship opportunities that they may qualify for.

Part-Time Job

It’s not ideal, but even a part-time job that only requires your child to work a few hours a week can add up over four years, helping your child to avoid having to borrow as much money.

Student Loans

College students have a choice between federal and private student loans. In general, federal loans are better-suited for undergraduate students because they don’t require a credit check, have relatively low-interest rates, and offer access to income-driven repayment plans and loan forgiveness programs.

If federal student loans aren’t enough to cover your child’s full cost of attendance, however, private student loans may be another option. Just keep in mind that you may need to co-sign the loan application with them to help them get approved.

Carefully Consider All Your Options

There’s no right or wrong answer to the question of whether parents should pay for their child’s college education. As such, it’s important for every parent to carefully consider both the benefits and drawbacks, and how they relate to your individual situation.

It’s also important to understand how much it will cost and what options you and your child have if you can’t make it work financially. As you go through this process, be sure to involve your child in the discussion and help them understand what’s ahead of them.

Things may not turn out exactly how you or they would like, but hopefully you’ll both have a better idea of how to do the right thing for your specific situation.

Find out if Private Student Loans from SoFi are right for you and your child.

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The Pros and Cons of Owning Rental Property

Owning rental property might conjure visions of a seemingly effortless monthly income that rescues you from the monotony of a day job. It’s definitely possible to see this kind of success, but it requires some luck and hard work.

Between mortgage payments, maintenance, and tenants, being a landlord is far from magical. Some might argue that venturing into real-estate investing is not for the faint of heart.

Excelling as a landlord requires a solid understanding of not only property investment pros and cons, but also of the local real estate market, taxes, and even people management. Read on to learn more about the pros and cons of rental property and tips for turning your rental property into a profit-driving real estate investment.

The Pros of Investing in a Rental Property

One pro of owning rental property, is the potential to build equity in the property . This can be especially true if for instance, market conditions are in your favor and/or you are able to rent the property to cover the cost of the mortgage and maintenance. As an added bonus, any upgrades you make on the property could constitute a higher rent assessment when the current lease expires.

Another pro to owning rental property is the potential for recurring revenue and passive income. It’s not exactly a “set it and forget it” investment, but on-time, in-full rent checks can go a long way toward a meaningful side hustle or even a full living wage.

The tax benefits that come with owning rental property are also a big draw. You can claim business-related expenses, some upkeep costs as well as depreciation on the property each year, but it can get pretty complicated. If you are at all unsure about the possible tax benefits or how to file your taxes as a rental property owner, we recommend getting help from a tax professional.

The Cons of Investing in a Rental Property

Remember earlier how we mentioned that it takes a little bit of luck to be successful at real-estate investing? Bad turns and “what ifs” make up quite a bit of potential cons. What if your tenants trash the place, or don’t pay rent, or both? What if you need to replace the roof or the A/C? What if the neighborhood goes downhill? The best-laid plans can be foiled by the unexpected. When you’re dealing with people and the local community, it’s a real possibility.

But assuming good fortune is on your side, there are still some potential disadvantages to investing in rental property. Today we will focus on three things—liquidity, taxes and fees, and tenants.

From an investment perspective, owning rental property isn’t liquid, meaning your assets cannot be sold quickly for cash. If repairs or other maintenance work is needed, a rental property can quickly swallow up every extra penny as well. And if you need fast cash, going through a real estate sale isn’t the best way to get it.

As much as you’re tied to the property, you’re also tied to its community. If the neighborhood thrives, you thrive. If it doesn’t, neither do you. Here’s where diligent research on the front end can help you pick a property that will likely be a stable long-term investment.

Fees and taxes take many forms, some of them necessary evils and others just plain unpleasant. Take, for example, property management fees. If you don’t live close enough to your property to maintain it or collect the rents yourself—or live next door but don’t want to deal—you can hire a property management company to handle the day to day. It eases some of the stress, but they charge a fee for their services, typically a percentage of the monthly rent . In addition, you may be required to keep a separate account of a few hundred dollars that they can access for minor repairs. Property management firms can also pre qualify potential renters for you and offer other services.

You’ll still need to pay property taxes, homeowners insurance, any HOA fees along with the mortgage, even if you don’t currently have tenants living in the rental property. If your state has a homestead exemption, you’ll lose that benefit for any properties that aren’t your primary residence. In addition, insurance rates can often be higher for rental properties due to the risks. But these policies can also help you in time of need. For instance, you can add Loss of Rents coverage to your rental policy. This coverage helps with the loss of rental income if the property becomes uninhabitable by a covered event such as a fire. Coverage is generally for a specified period of time.

One of the biggest tax ramifications of owning a rental property can be the state and federal capital gains taxes you’ll likely have to pay if you decide to sell. Capital gains are determined by subtracting your adjusted tax basis (original cost minus accumulated depreciation) from your net sales price. Translated, it means that if you claimed depreciation as a tax benefit while you were renting the property, you may be required to pay at least part of it back when you sell. Consult your tax advisor.

Another con can be the human element. If you get lucky and find tenants who pay rent on time, in full, and take care of your property, it’s probably a smart idea to do whatever you can to keep them.

If you need to go through the eviction process and start over, you may lose several months’ rent depending upon the laws in which the property is located and may have a big cleanup bill (that you may or may not be able to cover with any security deposit collected from the tenant upfront. One key to moving your tenants to the pro list is to screen, screen, screen and be picky about whom you choose.

How to Find the Perfect Rental Property

It may appear at first blush that the cons outweigh the pros, but many negative situations can be avoided by doing your research and making wise decisions based on what you learn.

First and foremost, set your financial goals. Are you looking for a vacation rental or a long-term lease? Is this a side hustle or a way out of the 9 to 5? Consider speaking with a financial advisor who can guide you through your options and help you make informed decisions. They can also give you advice on ways to diversify your portfolio, even if you’re short on cash.

Once you have goals in mind, take careful stock of not only the property, but the location, nearby amenities, tax rates, and HOA fees and any other special assessments. Next, get a thorough inspection and early estimates on any repairs. If you plan to manage the property on your own, choose a location that you can access easily.

What about setting the rent? Applicable rent controls aside, Some experts say that setting it too high is better than too low, since it’s more acceptable to lower a price than raise it. In the best scenario, Your rent assessment would cover the cost of the mortgage payment, taxes, insurance, and any fees and hopefully have a little left over to set aside for any issues that arise.

In addition, allow pets in your property could entice potential renters. Around 68% of American households own pets , and eliminating them from your potential tenant pool could leave you with an unoccupied property for longer than you’d like. Instead of saying no to Mr. Fluffy, add a pet deposit or additional monthly fee instead.

When you have a price, ask yourself if it’s realistic for the property condition and location. Would you pay that much to live there? If the answer is yes, you may well be on your way to being a rental property “pro.”

Learn more about how a SoFi financial advisor can help you set your financial goals, including your real-estate investments.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . The umbrella term “SoFi Invest” refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.


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Concentrated vs. Diversified Investment Portfolios

You may have heard the phrase “in order to make an omelet, you have to break some eggs.” We’re pretty sure that means that in order to achieve a beautiful thing, you have to take some risks. We’re on board with that.

However, there is another egg analogy that we swear by: “Don’t put all of your eggs in one basket.” Because we obsess as we do on smart financial planning, we believe this to mean not to sink all of your money into just one investment (concentrated investing).

Here, we’re going to break some eggs and explain the difference between concentrated and diversified investment portfolios. Read on and learn how you could place your eggs into a variety of baskets in order to ultimately create that beautiful omelet. Or at least an amazing nestegg.

Concentrated Stock Position Investments

In this world, there is one thing to be sure of: There is nothing to be sure of. Placing all of your money into one or two investments may seem like a sound plan, but you never know what the future may bring.

Say, for every Apple and IBM, there is a clunker investment that didn’t live up to its original promise. Even the most seasoned investors may not see what the future brings. Sometimes it’s great; other times, it could be a money suck. It’s a numbers game.

The more investments you have, the less concentrated risk you may face. To break it down, one sound investment can potentially make up for the poor performance of another.

Whether you are a concentrated investor or a diversified investor, risk is always going to be a thing. Let’s drill down to what each option may mean for you:

Advantages of Concentrated Stock Position Investments

One of the more notable champions of a concentrated portfolio is Warren Buffett, an investor who is very difficult to doubt.

Of investing in a concentrated portfolio, he said , “An investor should act as though he had a lifetime decision card with 20 punches on it. With every investment decision his card is punched, and he has one fewer available for the rest of his life.”

In other words, he’s saying do your homework, and when you make an investment choice, be very sure of it. And stick with it. Sounds like a solid plan, but, of course, not all of us are Warren Buffett.

Developing a diversified portfolio—as opposed to a concentrated one—takes work. If you are going to invest in a number of stocks, you’re going to need to research and understand them.

This takes time. On the other hand, focusing on just a few investments you believe in and know well could mean less fuss and less maintenance. And speaking of that, fewer investments may mean fewer maintenance and transaction costs over time. The money you save could continue to compound in your concentrated investment.

It may be prudent to hold on to a few investments for a long time and avoid all the short-term bumps and fender-benders that come along with other types of investing. The thought is to keep your eyes on the prize—all the highs and lows could eventually all come out in the wash and, in the end, you may accumulate the wealth you need.

When taking the concentrated investment route, the idea is to invest for the long term and let the funds compound. You wouldn’t need to take wide swings with investments that feel unfamiliar or uncertain. Basically, those investors just set it and forget it and have faith that the few investments they have chosen will do what they need to do over the long term.

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Disadvantages of Concentrated Stock Position Investments

Concentrated investing often takes a good deal of know-how, skill, and experience. Holding on to investments that don’t seem to move the needle can lose your money in the long run.

When you concentrate your investments, you might want to be darn sure that you are making the right decision to park your money in one spot for a long time. Staying with one investment may prevent you from taking a chance with a newer, more promising investment that could get you to your financial goals faster.

Ways to Diversify Your Investments

This is the easier part, and yet it’s not as easy as it sounds. Diversifying is merely spreading out your investment among a number of opportunities. However, you might need a strategy in mind. Here are a few ways you could do that:

Investing in more than one company. Instead of sinking all of your money into just one stock, you could spread out your money among a number of different ones.

Investing in more than one industry. For instance, media, real estate, steel, and financial services. If one industry is suffering, another industry may be booming. They might take turns winning and losing, but you’ll be there for both; and the winning might make up for the losses, but you’ll need to be in the right place at the right time.

Investing in both global and domestic stocks. This technique revolves around spreading your money around the world with the intent of protecting yourself from instability in the area of the globe that is currently experiencing challenges. Not every economy does well or poorly at the same time.

Investing in companies with different levels of market capitalization. Sounds complicated, but market capitalization is merely the market value of a company’s shares. Here’s how to do the math: Multiply the number of the company’s outstanding shares by the current market price of one share.

The answer is called the “market cap.” Example: If the company that interests you has 10 million shares selling at $50 per share, the market cap is $500 million (10 million shares x $50). This answer also shows you how big or small a company is compared to other companies. Your diversified portfolio could include small to large-cap stocks .

Investing in different asset classes. There are three main asset classes : stocks (also called equities), bonds (also called fixed-income), and money markets (also called cash equivalents). You could also consider alternative asset classes, such as real estate and buying and selling cryptocurrency like Bitcoin, Ethereum, Litecoin, Bitcoin Cash, Ethereum Classic, and more. The idea is to hold a variety of investments with different levels of risk and returns, a strategy which can help protect you against risk.

Investing in growth stocks. This is when you invest in companies that are considered golden by many. The anticipation for a growth company’s success is high, and growth investors want to get on board without too many questions asked. You might not receive dividends right away for a growth company stock—instead, the earnings are usually reinvested back into the company in order to grow even larger. The money is usually earned through capital gains , when the stock is eventually sold.

Value investing. Here, investors look for a hidden gem: companies that may be presently undervalued but are on the verge of becoming superstars (or even just stars). If and when the company’s valuation increases, the value investors wins, earning a profit on the stock price increase. Value investors are often brave people, putting themselves in the line of danger when everybody else runs the other way.

Concentrated vs. Diversified? What to Ask Yourself Before Choosing an Investment Strategy

Before hooking up the dartboard and putting on your blindfold, it might be a good idea to have a clear idea of your endgame. Ask yourself about your investment goals and how afraid you are (or aren’t) of risk. Each stock, ultimately, is a gamble, and no one strategy is always better than another. Each investment comes with advantages and disadvantages.

Advantages of a Diversified Portfolio

Spreading your money out can help reduce your vulnerability to ups and downs. Another word for this is volatility . That’s when you can measure your portfolio risk by exact numbers, using a specific formula. From there, you could decide how comfortable you are with that risk factor.

If all of your money is concentrated into one industry, market sector, or asset class, you might suffer when that category does not do well. As a result, you could lose money and fall behind in achieving your goals.

On the other hand, diversification could open you up to more opportunities when a certain category of investment starts to improve or even blow up.

Think of those investors who believed in Apple back in the day—they may have invested in other stocks as well, but they wouldn’t have been able to miss the big gains that Apple started to earn on a consistent basis. If you’re still in your 20s, you might have the chance to find the next Apple and get an amazing head start.

Disadvantages of a Diversified Portfolio

You might hear so much about the awesome benefits of a diversified portfolio, but remember that no sure thing is a sure thing. Here are a few red flags you could look out for when it comes to diversification:

Over-diversifying. Diversifying may be good, but over-diversifying is not. If more of your stocks are doing fair-to-poor than the few that are doing well, you won’t be getting ahead. A situation like that calls for some reconfiguring.

Maintenance and transaction costs. If you invest in funds that charge fees, your diversification might nickel-and-dime you and get in the way of your good time.

Lack of knowledge. If you haven’t done your research and due diligence and if you are just going on hunches, instinct, and hearsay, you could be in for a world of trouble. Don’t diversify for the sake of diversification. Instead, you might want to take educated guesses by schooling yourself.

Whether it be concentrated or diversified investment, consider this first:

Where to put your money? Forbes has a few rules of thumb:

Take advantage of your knowledge of technology. Younger generations as a whole generally have technology in their DNA . That comes in handy as the tech sector seems to be changing on a daily basis, constantly evolving and turning the heads of investors. It’s a growth story when it comes to many tech stocks. You could do your due diligence and take a look at some up-and-coming tech companies, or you might want to invest in the technology you think will become a big part of our tomorrow.

Invest in your passions. What do you like? What arouses your interest? It could be anything from video games and phone apps to ecological-friendly causes or cool, innovative pet toys. They say, “do what you like and the money comes,” (although we cannot verify who “they” are)—the same may be said for investing. If you invest in something you love, it may be easier for you to follow and understand its growth. You might also enjoy checking in on your investment every day.

Invest in what you know. If you can’t find an investment you’re immediately passionate about, a good first step might be to find an investment that makes sense to you. Because investing can be confusing at times, it might help to be invested in something you understand. Eliminating as much befuddlement as possible could help you figure out a long-term strategy for your investments.

Stay steady. Especially if you’re a newbie, you might test the waters by wading in the shallow part of the pool first. You could try to find an investment that shows a rather steady history, so you can watch your investment grow and learn as you go. Some investments might double as roller-coaster rides, and they’re not for the faint of heart. Instead, starting out on the baby rides might help you get your bearings.

Find a good advisor. Sometimes it’s good to seek a second opinion. Before you take the plunge, you could consider talking to a financial advisor, who may be able to tell you the stuff you never would have known on your own.

Diversifying With SoFi

Portfolio diversification might give you peace of mind, but it shouldn’t stop there. Doing your research to know what you are getting into could help. The more of a mix you have, the more diversified you’ll be.

Investing with SoFi Invest is an easy and convenient way to get started. Most important, SoFi could help you map out a plan and a plant a goal post to help you work on achieving the very things you want out of life, be it retirement or emergency savings, a downpayment on a new home, or preparing for a family.

Get started with SoFi Invest today!

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . The umbrella term “SoFi Invest” refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.


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Strategies for Building an Investment Plan for Your Child

They make you laugh, and they make you cry. You worry about them when they’re out of sight, and even when they’re in plain view. You desperately hope they grow up strong, healthy, and ready to tackle life’s challenges.

After all, they are your pride and joy. Children make parents do some pretty selfless things, and one of the more beneficial thing you could do is plan for their financial future. But how do you do that with everything else you have to worry about in your life?

Fortunately, there are some fairly simple financial tools to help you meet your goals, whether you’re saving for a college education, a once-in-a-lifetime summer camp, or a down payment for their first home.

Depending on your situation, some options might be obvious good choices, while others come with caveats you might want to know about before investing.

With a little background knowledge, you could find an investment plan for your child’s future. An investment for a child could also provide a great education in financial responsibility.

Let’s look at some of the choices.

Custodial Accounts

A simple custodial savings account in your child’s name could be a good start as an investment for a child. When a baby is born, everybody from Grandma to Uncle Joe may want to contribute to the account. Unlike college savings plans , which require the funds be used for education, custodial accounts offer a lot of flexibility.

Savings can be used for almost anything—a European vacation, car for college, pre-college expenses—as long as it is for the benefit of the child. Just remember, any money in an investment account for a child is irrevocably in their name and for their benefit . You can’t take it back.

A custodial account could be a great vehicle for children to learn how to invest. In fact, if you’re wondering how to buy stock for a child to help them learn about money, a custodial account might be a great investment account for a child. You could pick a company they would be excited to follow, like Disney or McDonald’s, and let them watch over time.

Custodial accounts, also known as Uniform Gift to Minors Act (UGMA) and Uniform Transfers to Minors
(UTMA) accounts, don’t have a limit to how much you can invest. While contributions aren’t tax-deductible, there may be a tax advantage because it’s in the child’s name.

But that advantage might quickly turn into a disadvantage if unearned income from dividends, gains, or interest reaches a certain amount. Then the account is subject to the Kiddie Tax , which Congress enacted to prevent abuse of the financial vehicle by parents. With a custodial account, you can gift up to $15,000 in 2019 for each child; double that if you’re married and filing jointly. Above that you’re liable for the federal gift tax .

While you can use the money in the account to pay for various things your child needs, one caveat is that the child gets full control when they reach the age of majority, usually 18 or 21 years of age.

Custodial accounts might be good for modest, defined goals, such as paying for education, orthodontia, or academic camps, for example. If there is a sizable sum of money in the account, consider whether you want to transfer that amount, unregulated, to someone of such a young age. In that situation, one idea might be to have a lawyer draw up a trust to set up specific parameters you can live with.

If the thought of giving up control is too much for you, you could set up a guardian account in your name so you can decide how the money is spent. Essentially, it’s a way to earmark funds to give to your child down the road.

College Savings Accounts

A Coverdell education savings account or a 529 savings plan could be a worthy option for a child. They offer two ways to pay for educational costs, whether college or K–12 schooling. The Coverdell allows you to contribute up to $2,000 a year for education expenses. While contributions are not tax deductible, withdrawals are tax-free.

Coverdells have two areas where they might have a slight advantage over 529 accounts: You can select from a wide range of investments and the money you withdraw can be used for any qualifying education expenses, such as books, tutors, and equipment.

The 529 college savings plan tends to be a popular way to save for college. You can make larger contributions than you can with a Coverdell account, and any withdrawals for qualified education purposes are tax-free.

As of 2018, Congress allows withdrawals of up to $10,000 for K–12 tuition. Not all plans or states that sponsor 529 plans are in line with the new rules , so you might want to ask a tax expert or the manager of the plan about your options.


Custodial (Traditional)

Custodial IRAs are another investment option for a child. They work just like a traditional IRA, so when your child has earned income from a first job, babysitting, or other work, they (or you) can contribute up to $5,500 annually . Starting early might be a way to teach them about the power of financial stewardship.

With a traditional custodial IRA, your child will pay ordinary income tax when they withdraw the money in retirement, and they must begin doing so at age 70½ . Contributions are also tax deductible, which probably won’t benefit them if their income is still low or they don’t meet the $12,000 standard deduction threshold requiring them to pay federal income tax.

Both traditional and Roth custodial IRAs convey to the child at the age of majority (18 to 20 years of age, depending on the state).


Just like traditional IRAs, contributions to a Roth IRA also grow tax-free over the years and have the same contribution limits—however, the Roth could be an investment possibility for your child if you value flexibility. Whether you’re saving for college or retirement, it might offer more advantages for your child over the decades than a traditional IRA.

While you still pay tax on each contribution, all withdrawals are tax-free , which could be a big benefit to your child, assuming they’ll be in a higher tax bracket at retirement. There is no required minimum distribution when they must start withdrawing.

One of the biggest advantages to a Roth is that your child could use the contributions for any reason besides retirement. But two special perks of the Roth include the ability to pay for certain higher education expenses and withdraw up to $10,000 to buy their first home. On the other hand, if withdrawn before retirement, earnings can be taxed and your child could be penalized in addition.

Growing Wealth for Your Children

When it’s time to get serious about saving—for college, retirement, or something else—you could set up an account with SoFi Invest®. It’s easy to open an investment account with SoFi, and you’ll have access to complimentary financial advisors and other benefits to help your family save for a bright future.

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5 Strategies to Help Pay Off Medical Debt

Illness and injury are an unfortunate (and scary!) fact of life, but once you’re patched up after surgery or a lengthy hospital stay, you want to focus on your recovery, not worrying about how on Earth you’re going to pay off any medical debt.

Medical debt can be overwhelming, and according to a 2018 study published by Health Affairs, it’s not just older Americans who are managing debt from medical bills.

It is actually Millennials who are racking up the most medical debt—11% of all people who had a medical bill go to collections in 2016 were just 27 years old. So how can you pay off medical bill debt and hopefully stay out of collections? There are several different options available that may help you manage your medical debt with minimal pain, so you can focus on feeling better.

Before we dive in, we should mention we realize the nature of medical debt is often very sensitive. These strategies are merely a collection of tips and commonplace ideas found through our research on the internet.

This article shouldn’t be considered advice in any sense; every person’s situation is unique, which means it’s always a good idea to check in with a professional before taking action yourself. With that said, let’s dive into what we found.

Medical Debt Payment Plans

Medical care can be expensive, especially if you’re facing a chronic condition with ongoing costs or a major surgery or hospital stay. One plan of action you might consider is contacting your medical provider to see if they offer payment plans.

Some providers offer payment plans that allow you to make payments on your medical bill over time, paying it off in installments. Talking to your healthcare provider or a hospital billing department can be a great first step to figuring out if there is a payment plan you can take advantage of when it comes to medical bill debt.

Of course, one major downside to payment plans is that not all medical providers or medical offices offer payment plans and may require full payment when services are rendered.

Likewise, some medical providers may only let you set up a payment plan in advance, which means that a payment plan might not be a solution for any medical debt you’ve already accrued. And of course, some payment plans may still be too prohibitively expensive to pay every month, even if you’re paying over time.

Using A Medical Credit Card

If you’re looking at a medical bill that you can’t pay out of pocket, you may be tempted to reach for a credit card. Before you hand over whatever card is in your wallet, you might want to consider looking into credit cards specifically designed to be used to pay for medical care.

Medical credit cards sometimes offer low or no interest for a predetermined period of time, which means that you may be able to pay your medical bill with the credit card and then pay off the card before it accrues interest.

But be careful—if you can’t pay off the credit card before the interest-free period is over, you might face high-interest charges, which could actually end up making your medical bills more expensive.

Consider pulling out the calculator and doing some math to see if you can afford to pay off your medical bills during the interest-free period before you decide to put the costs on a medical credit card. This can help you determine how useful a medical credit card might be in your specific situation.

See how a personal loan
from SoFi can help with medical costs.

Negotiating Directly With The Hospital

If you’re facing a big bill from the hospital, one thing to consider is reaching out directly to the hospital billing department to see if you can negotiate the total amount of your medical bill.

While it’s not precisely like haggling for a used car, most hospitals have a financial department that might be able to help you determine if you qualify for any cost deductions or discounts.

One other thing to keep in mind is that cash might just still be king. Some hospitals and medical providers might give you a discount just for paying in cash. This can be a good option if you can afford to make the payments in one lump sum and want to avoid any extra fees.

Taking Out A Personal Loan

Taking out a personal loan might also be a solution to managing medical debt. While personal loans are often overlooked, they may offer more benefits than credit cards, like lower interest rates and more flexibility.

In order to use a personal loan to pay off medical bill debt, you’d borrow money from a lender which you’d use to pay your medical debt, then you’d pay that money back to the lender over time in regular monthly payments. Like other types of loans and financing, lenders generally look at your personal financial history and ability to repay (among other factors) when deciding if you qualify for a personal loan and determining your interest rate.

Unlike other types of financing, however, a personal loan can be used for almost everything—from paying off a hospital bill to paying for your groceries while you’re out of work due to an injury or illness.

If you’re wondering how to clear medical debt from multiple sources, a personal loan might help. You may be able to use a personal loan to consolidate numerous medical debts into one monthly payment. This could work by taking out a medical loan and using it to consolidate different medical bills, which allows you to focus on paying off just one debt instead of managing multiple varying deadlines every month.

When searching for personal loans to pay for medical debt, be sure to read the fine print. Some providers may charge origination fees to process your loan, or prepayment fees if you pay off your loan early.

Also be wary if interest charges in your search, as high-interest charges could add more money paid over the life of the loan.

One other potential benefit of using personal loans is that the application process is relatively simple and you can usually find out your eligibility pretty quickly. With SoFi personal loans, it just takes a few minutes to check your rate. And with SoFi, there are no fees required.

There’s no way around it—medical bills can be hard to deal with. But making a plan for repayment you help you get on your way to financial and physical wellness.

Learn more about how a personal loan from SoFi can help with medical costs.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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