USAA Magazine Fall 2006

COLLEGE-FUND FANATICSJim and Nancy Park are 30-somethings who put asideeverything they can afford from the diner they ownto build up their twin daughters’ college fund. Suchsacrifice makes them feel good, but are they bowingto misguided traditions at the expense of their ownfinancial security?Think again: Scholarships, grants, summer jobs,and, yes, student loans likely will come into playbefore this couple drops off the twins in fall 2020.“The Parks may be saddled with some destructivemoney beliefs,” says Dr. Brad Klontz, clinical psychologistand co-author of The Financial Wisdomof Ebenezer Scrooge. “Somewhere they got themessage that to be good parents they have to payfor their adult children’s education, even if theycan’t afford it. By not saving for retirement, theymay burden the twins with taking care of financiallydestitute parents.”Action items for the Parks:■ Question assumptions about paying for all of achild’s college tuition.OVERLY HAPPYHOMEOWNERS■ Consider the twins’ educational needs whendetermining life insurance coverage amounts.■ Target retirement needs with an investmentaccount such as an IRA and incorporate thekids’ education through vehicles like a 529 plan.OVERLY HAPPY HOMEOWNERSBob and Liz Casagrande rule the roost at their new,4,500-square-foot mini-palace. In their mid-40s,they have three children ages 8 to 14. This is theirthird home in 10 years; it’s really their only investment.As real estate players, they’ve neglected tobuild a college, retirement, or emergency fund. Theyplan to make further “investments,” such as kitchenupgrades. “We can put money into this place andtake equity loans when we need cash,” Bob says.Think again: “The math doesn’t work,” says JebBashaw, investment principal at a Houston firm.“Using your home as a primary investment vehiclehistorically has yielded 3 to 4 percent a year andin some markets 0 percent, while a diversified marketportfolio may potentially earn 10 percent overtime. In today’s market, an investment that you can’tquickly convert to cash, like a granite countertop,doesn’t make sense.”Action items for the Casagrandes:■ Diversify by investing in high-quality mutualfunds.■ Get investment exposure outside the U.S., notjust American companies that do businessUSAA.COMWINTER 2007 USAA MAGAZINE15