Saving Money for College - College Savings Plans For Kids

Invest in Your Child’s Future

Start Planning for College Now!

Invest in Your Child’s Future

Start Planning for College Now!

For more information on saving for college go to http://mysoundstrategy.wordpress.com

Securities offered through LPL Financial, Member FINRA/SIPC

Why should you consider college Why should you consider college planning today?planning today?

How to develop a college savings planHow to develop a college savings plan

Get started today!Get started today!

Today’s Agenda

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More than 80% of More than 80% of Americans believe that Americans believe that

sending their children to sending their children to college is achievablecollege is achievable

83% believe that the 83% believe that the cost of college is worth cost of college is worth

it, given a college it, given a college education’s valueeducation’s value

Our National Poll Revealed…

College a highly valued College a highly valued credentialcredential 90% of Americans view 90% of Americans view

sending their kids to sending their kids to college as an essential part college as an essential part of the American dreamof the American dream

64% strongly agree that 64% strongly agree that their children will earn their children will earn more in the long run with a more in the long run with a college degreecollege degree

Source of data: “Keeping College Within Reach” study sponsored by OppenheimerFunds. 1001 parents interviewed via telephone between February 2 and 26, 2009. Page 3

Why did 46% say it’s more important to Why did 46% say it’s more important to save for a college education than save for a college education than retirement? retirement?

Because…Because…

““I can always put off my retirement, I can always put off my retirement, but my kids can’t put off college.”but my kids can’t put off college.”

A Belief in the Value of a College Degree

Source of data: “Keeping College Within Reach” study sponsored by OppenheimerFunds. 1001 parents interviewed via telephone between February 2 and 26, 2009. Page 4

Amidst economic slowdown, families:Amidst economic slowdown, families: 60% have not put saving for college on hold 60% have not put saving for college on hold 60% have not reduced the amount they are 60% have not reduced the amount they are

saving for college saving for college 92% have not withdrawn funds from a college 92% have not withdrawn funds from a college

savings plansavings planandand

Only one in four (26%) agree that the high cost Only one in four (26%) agree that the high cost of college has discouraged them from savingof college has discouraged them from saving

However, many are considering, or planning to However, many are considering, or planning to consider, more affordable colleges or consider, more affordable colleges or universities (57%)universities (57%)

College Savings Efforts: Most Families Staying the Course

Source of data: “Keeping College Within Reach” study sponsored by OppenheimerFunds. 1001 parents interviewed via telephone between February 2 and 26, 2009. Page 5

77% have saved less than 77% have saved less than $20,000$20,000

43% have saved less than 43% have saved less than $5,000$5,000

56% think scholarship money 56% think scholarship money will pay for a substantial will pay for a substantial

portionportion

Nearly 80% want to Nearly 80% want to cover 50% or more of cover 50% or more of college expenses, 24% college expenses, 24% say they want to cover say they want to cover

the full amountthe full amount

Many are Strongly Motivated to Keep Borrowing Under Control

Parents are committed…Parents are committed… Preparing their childrenPreparing their children Sticking to their savingSticking to their saving

strategiesstrategies

……But not realisticBut not realistic Aspirations don’t matchAspirations don’t match

the reality of their saving the reality of their saving effortsefforts

Reluctant to have children Reluctant to have children take on debttake on debt

Source of data: “Keeping College Within Reach” study sponsored by OppenheimerFunds. 1001 parents interviewed via telephone between February 2 and 26, 2009. Page 6

77%77% of families have saved less than of families have saved less than $20,000 for college$20,000 for college 62%62% have saved less than $10,000 have saved less than $10,000 43%43% have saved less than $5,000 have saved less than $5,000 12%12% of families have saved nothing at all of families have saved nothing at all

56%56% think scholarship money will pay for think scholarship money will pay for a substantial portion of their kids’ college a substantial portion of their kids’ college educationeducation

Just Just 25%25% have limited spending on things have limited spending on things like eating out and entertaining, to help like eating out and entertaining, to help kids get to collegekids get to college

Financial Aspirations Not All in Sync with Financial Realities

Source of data: “Keeping College Within Reach” study sponsored by OppenheimerFunds. 1001 parents interviewed via telephone between February 2 and 26, 2009. Page 7

We Asked: How much, if anything have you saved for your kids’ college education?

Source of chart data: OppenheimerFunds “Understanding Consumer Knowledge of College Savings Vehicles” study, February 2006.

0%

5%

10%

15%

20%

25%

Nothing $1,000-$2,000

$2,000-$5,000

$5,000-$10,000

$10,000-$20,000

$20,000 ormore

Among those who say it is very or somewhat likely that their child (or any of their children) will attend college in the future:

Note: 4% responded don’t know/declined to answer.

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According to 2008-2009 estimates from According to 2008-2009 estimates from the College Board:the College Board: Roughly two-thirds of all full-time Roughly two-thirds of all full-time

undergraduate students receive grant aidundergraduate students receive grant aid11

Grants and tax benefits averaged about Grants and tax benefits averaged about $3,700 for in-state students at public four-$3,700 for in-state students at public four-year colleges versus average annual costs year colleges versus average annual costs of $14,333of $14,3331,21,2

Students at private four-year colleges Students at private four-year colleges received approximately $10,200, compared received approximately $10,200, compared with average annual costs of $34,132with average annual costs of $34,1321,21,2

Financial Aspirations Not All in Sync with Financial Realities

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1. Source of data: 2008-2009 College Prices: Keep Increases in Perspective Http://www.collegeboard.com/parents/csearch/know-the-options/21385.html.

2. Source of data: The College Board. Trends in College Pricing 2008. http://professionals.collegeboard.com/profdownload/trends-in-college-pricing-2008.pdf

Need to increase awareness of college Need to increase awareness of college savings vehiclessavings vehicles

Fitting college into overall savings and Fitting college into overall savings and investment plans is a huge challengeinvestment plans is a huge challenge

Parents need help!Parents need help!

What Does This All Mean?

And…And…

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How old will you be when your youngest child How old will you be when your youngest child graduates college?graduates college?

Have you spent all your savings?Have you spent all your savings?

Have you borrowed to the hilt?Have you borrowed to the hilt?

Have you taken out a second mortgage?Have you taken out a second mortgage?

Have you tapped your retirement funds?Have you tapped your retirement funds?

How will you pay off college debt and save How will you pay off college debt and save enough to retire?enough to retire?

College Can Be a Retirement Issue

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There are generally loans available for college There are generally loans available for college But, who will lend your clients money But, who will lend your clients money

for retirement?for retirement? Effective planning Effective planning todaytoday can help ensure: can help ensure:

A successful college plan A successful college plan and and A comfortable retirementA comfortable retirement

College Can Be a Retirement Issue

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College Can Be a Retirement Issue

1. Set goals.2. Prioritize tax, financial aid and control of

assets issues.3. Determine the account owner.4. Select appropriate investments.5. Start saving now.

1. Set goals.2. Prioritize tax, financial aid and control of

assets issues.3. Determine the account owner.4. Select appropriate investments.5. Start saving now.

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Recognize the value of a college degreeRecognize the value of a college degree

Understand real costs of collegeUnderstand real costs of college

Consider impact of college inflationConsider impact of college inflation

Determine amount you need to saveDetermine amount you need to save

Step 1: Set Goals

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Set Goals College Is an Investment

The value of a college education as reflected in future earnings potential:The value of a college education as reflected in future earnings potential:

The lifetime gap in earnings potential is over $1 million!

The lifetime gap in earnings potential is over $1 million!

• High School Diploma $31,500

• Bachelor’s Degree $50,900

• Professional Degree $100,000

• High School Diploma $31,500

• Bachelor’s Degree $50,900

• Professional Degree $100,000

Source of data: The College Board, “Education Pays 2007”U.S. Census Bureau. Based on median annual household income in 2006.Page 15

Difference =+218%

Difference =+218%

1.1.Parents who want the best regardless of cost.Parents who want the best regardless of cost.

2.2.Fearful parents who only consider low-cost Fearful parents who only consider low-cost schools.schools.

Set Goals Two Types of Parents

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Tuition and feesTuition and fees Room and boardRoom and board Books and suppliesBooks and supplies

Set Goals How Much Does College Really Cost?

And…•Transportation•Personal expenses•“Extras”

And…•Transportation•Personal expenses•“Extras”

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$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

$450,000

StateCollege, In-

StateResident

StateCollege,Out-of-State

Resident

ModeratePricedPrivateCollege

MoreExpensive

PrivateCollege

Ivy Leagueor Similar

College

Cost for 4 Yrs 2008Cost for 4 Yrs 2016

Set Goals Projected College Costs by Category

Source of chart data: College Money Annual College Cost Survey, 2008.Page 18

0%

1%

2%

3%

4%

5%

6%

7%

8%

Last 5 Yrs Last 10 Yrs Last 15 Yrs Last 20 Yrs

College Inflation CPI

College inflation has increased by almost double College inflation has increased by almost double the amount of the CPIthe amount of the CPI

State college tuition rose 6.4% in 2008State college tuition rose 6.4% in 2008

Source of chart data: The College Board 2007 U.S. Department of Labor Bureau of Labor Statistics.

Set Goals Projected College Costs by Category

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Which type of college makes the most Which type of college makes the most sense?sense?

How aggressive should investments be?How aggressive should investments be? How much do you need to save?How much do you need to save? The The College Savings ProjectorCollege Savings Projector can help can help

Set Goals

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Build the plan around these three issues:Build the plan around these three issues: Tax savingsTax savings Financial aidFinancial aid Control of assetsControl of assets

Step 2 Prioritize Tax, Financial Aid and Control of Assets

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Depends on tax bracket and how much you Depends on tax bracket and how much you savesave

May not be important if you can take May not be important if you can take advantage of other benefitsadvantage of other benefits

Prioritize Tax, Financial Aid and Control of Assets Tax Savings

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Some who hope to qualify, won’t Some who hope to qualify, won’t

Some who could qualify, assume they Some who could qualify, assume they won’twon’t

Consider the Consider the Financial Aid EvaluatorFinancial Aid Evaluator

Prioritize Tax, Financial Aid and Control of AssetsFinancial Aid

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What if the kids don’t go to college?What if the kids don’t go to college?

Who makes the decisions about the college Who makes the decisions about the college funds?funds?

Prioritize Tax, Financial Aid and Control of AssetsControl of Assets

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Benefits have trade-offsBenefits have trade-offs

Difficult to get all three in one planDifficult to get all three in one plan

Choose an investment that maximizes the Choose an investment that maximizes the single benefit most important to your single benefit most important to your familyfamily

Prioritize Tax, Financial Aid and Control of AssetsBalance Is Key

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In student’s name:In student’s name: May help reduce tax burden May help reduce tax burden Can limit financial aidCan limit financial aid

In parent’s name:In parent’s name: Potentially less damaging to financial aidPotentially less damaging to financial aid May reduce potential tax savingsMay reduce potential tax savings

Step 3Determine the Account Owner

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529 college savings plans529 college savings plans

Coverdell Education Savings AccountsCoverdell Education Savings Accounts

UGMA/UTMA accountsUGMA/UTMA accounts

Traditional portfolio of fundsTraditional portfolio of funds

Variable universal life insurance Variable universal life insurance

U.S. savings bondsU.S. savings bonds

Step 4Select the Appropriate Investments for Your Situation

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Tax-free growth and withdrawals if used for Tax-free growth and withdrawals if used for qualified expensesqualified expenses

Estate tax benefitsEstate tax benefits Potential state tax deductions and Potential state tax deductions and

exemptions on gainsexemptions on gains11

Usually somewhat financial aid friendlyUsually somewhat financial aid friendly

(cont’d.)(cont’d.)

529 College Savings Plans – Savings Plans

1. Some states offer favorable tax treatment to their residents only if they invest in the state's own plan. Out of state residents should consider whether their state offers its residents a 529 plan with alternative tax advantages and should consult their tax advisor for more details.Page 28

Account owner controls assetsAccount owner controls assets

Limited control over investmentsLimited control over investments

Can be used at any eligible post-secondary Can be used at any eligible post-secondary institutioninstitution

Ordinary income tax and an additional 10% Ordinary income tax and an additional 10% federal tax due on funds not used federal tax due on funds not used for college expensesfor college expenses

Can be rolled over to another family Can be rolled over to another family membermember

(cont’d.)(cont’d.)

529 College Savings Plans – Savings Plans

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Tuition credits for future yearsTuition credits for future years

Designed to return approximate college Designed to return approximate college inflation inflation

Can be financial aid unfriendlyCan be financial aid unfriendly

Can be rolled over to another childCan be rolled over to another child

Changing plans may be difficult Changing plans may be difficult

If withdrawals are used for purposes other If withdrawals are used for purposes other than qualified higher education expenses, than qualified higher education expenses, earnings portion is taxable and a 10% earnings portion is taxable and a 10% federal tax penalty applies.federal tax penalty applies.

529 College Savings Plans – Prepaid Plans

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Maximum annual contribution now $2,000 Maximum annual contribution now $2,000

Income limitationsIncome limitations

Potentially financial aid unfriendlyPotentially financial aid unfriendly

Gains not taxedGains not taxed

10% penalty + taxes10% penalty + taxes

Limited control over distribution Limited control over distribution

Maximum control over investmentsMaximum control over investments

Can be used for K-12 expensesCan be used for K-12 expenses

Coverdell Education Savings Accounts

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UGMA/UTMA Accounts Money is irrevocably given to the minor Money is irrevocably given to the minor

and cannot be transferred to another childand cannot be transferred to another child

Can be financial aid unfriendlyCan be financial aid unfriendly

Student controls money at majorityStudent controls money at majority

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Traditional Portfolio of Funds Financial aid friendlyFinancial aid friendly

Not tax friendlyNot tax friendly

Parental control over ownership Parental control over ownership and investment decisionsand investment decisions

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Variable Universal Life Insurance Financial aid friendlyFinancial aid friendly

Potential tax benefits Potential tax benefits

Owner controlsOwner controls

Limited investment choicesLimited investment choices

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Variable Universal Life Insurance

Name owner, beneficiary and insured with Name owner, beneficiary and insured with carecare

Design contract to:Design contract to: Minimize death benefit Minimize death benefit

Maximize cash valueMaximize cash value

Preserve tax benefitsPreserve tax benefits

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Step 5Start Saving Now!

Many parents may be:Many parents may be:

Panicking because of huge costsPanicking because of huge costs

Overwhelmed by the amount they Overwhelmed by the amount they have to savehave to save

Paralyzed into “inaction”Paralyzed into “inaction”

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Hypothetical College Cash Flow Hypothetical College Cash Flow

-$200,000

-$150,000

-$100,000

-$50,000

$0

$50,000

$100,000

$150,000

0 5 10 15 20 25 30 35 40

SavingsSavingsSavingsSavings

Spending: Pay for CollegeSpending: Pay for CollegeSpending: Pay for CollegeSpending: Pay for College

Recovery: Repay DebtRecovery: Repay DebtRecovery: Repay DebtRecovery: Repay Debt

The Life of a College Plan

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1. Set goals.

2. Prioritize tax, financial aidand control of the assets.

3. Determine the account owner.

4. Select appropriate investments.

5. Start saving now.

1. Set goals.

2. Prioritize tax, financial aidand control of the assets.

3. Determine the account owner.

4. Select appropriate investments.

5. Start saving now.

Remember…

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1. Consider which type of college your child will attend

2. Determine projected college costs

3. Evaluate your financial aid eligibility

4. Identify how much you need to save

5. Talk to your financial advisor

1. Consider which type of college your child will attend

2. Determine projected college costs

3. Evaluate your financial aid eligibility

4. Identify how much you need to save

5. Talk to your financial advisor

Get Started Today

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Investments in 529 college savings plans are neither FDIC insured nor guaranteed and may lose some value. Some states offer favorable tax treatment to their residents only if they invest in the state’s own plan. Investors should consider before investing whether their or their designated beneficiary’s home state offers any state tax or other benefits that are only available for investments in such state’s qualified tuition program and should consult their tax advisor. Before investing in a plan, investors should carefully consider the investment objectives, risks, charges and expenses associated with municipal fund securities. Plan disclosure documents contain this and other information about a plan, and may be obtained by asking your financial advisor, visiting our website at www.oppenheimerfunds.com or calling 1.800.525.7048. Investors should read these documents carefully before investing.

This material is provided for general and educational purposes only, and is not intended to provide legal, tax or investment advice, or for use to avoid penalties that may be imposed under U.S. federal tax laws. Contact your attorney or other advisor regarding your specific legal, investment or tax situation.

Shares of Oppenheimer funds are not deposits or obligations of any bank, are not guaranteed by any bank, are not insured by the FDIC or any other agency, and involve investment risks, including the possible loss of the principal amount invested.

Oppenheimer funds and 529 college savings plans managed by OppenheimerFunds are distributed by OppenheimerFunds Distributor, Inc., Member NASD, SIPC Two World Financial Center, 225 Liberty Street, New York, NY 10281-1008.© Copyright 2009 OppenheimerFunds Distributor, Inc. All rights reserved.

Thank You!

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