Often the best place to save for a child's college education is the parent's Roth IRA, if the parent is eligible.

There are several advantages:

• The savings grow tax deferred, and the contributions can be taken out without penalty.
• The money stays in the parent's name, where it remains in the parent's control and typically has a smaller impact on college financial aid awards.
• Money in the Roth IRA can be used for various family members' college expenses.
• When money is withdrawn for college expenses, the Roth's earnings may be taxable but are penalty free.
• And of course, the funds may be needed for retirement instead of college. (Like many ACA planners,

I remind clients that children can always borrow to go to college, but their parents can't borrow for retirement.) If Roths aren't an option for parents, either because they have already maxed out their contributions or aren't eligible, the next choice may be a Roth in the child's name. If children have earned income, they can make a Roth contribution, which can later be used for their college education. And if the Roth isn't used for college, teenagers have either college money for their own little ones in the future or for the down payment for a house. (Or maybe you'll enjoy a fun golf partner because with such an early start, your child may retire by age 40!)

Another option is a Section 529 plan or Qualified Tuition Program. The donor (usually a parent or grandparent) makes a contribution into a Section 529 plan and investments are purchased within the plan, much like a 401(k). Investment options vary by state. Withdrawals are not taxable when less than or equal to annual qualified higher education expenses, adjusted for tax-free education assistance and amounts used to figure education credits.

A 10% penalty is imposed if the funds are not used for college education, but only the earnings are penalized. If a grandparent or parent has an estate tax problem, they can reduce their liability with a contribution to the beneficiary's 529 plan. This is considered a "completed gift," so it's no longer in the grandparent's or parent's taxable estate. Section 529 plans differ from other college savings options in many significant respects:

• Unlike Roth IRAs or other options, Section 529 plans aren't subject to income limits: you can contribute no matter how much you earn.

• Unlike certain prepaid plans, you can invest in another state's plan, and the student can go to school in any state.

• Unlike UTMA (Uniform Transfers to Minors Act) accounts (custodial accounts), the donor maintains control and ownership, so if your oldest child doesn't attend college, you can use the account to pay for another child's (or other relative's) college expenses.

The proceeds of a Section 529 plan can be used not only for tuition but also for books and room and board. (If the child lives at home, he can pay a room and board allowance specified by the school to Mom and Dad.) And if your scholar receives a full tax-free scholarship, the money can be taken out without incurring the 10% penalty.

Not all Section 529 plans are created equal. Ask your ACA advisor for help identifying the best plan for you and your beneficiary.

A related college savings option is the Upromise Credit Card (www.upromise.com). When you make purchases at any of more than 8,000 restaurants or 600 online retailers or you buy eligible items at the grocery or drugstore, a cashback percentage is directed into your Upromise account, which you can then use to fund a Section 529 plan or to pay college expenses or a student loan.

Of course, just about the only thing better than saving in advance for college is going to college for free. Websites such as www.Fastweb.com and www.Collegeboard.com/ScholarshipSearch can help you search for a fit between the student and any of thousands of available scholarships totaling over $1 billion. (One caveat: such sites can be rife with ads and special offers, so be careful when filling in information and checking boxes.) Other sources of college aid information include www.WiredScholar.com, www.FinAid.com, www.eStudentLoan.com, and www.Scholarships.com.

Trying to decide among all your college financing options can be confusing. A call to your ACA advisor can help you determine which options are best for you and offer you the greatest chance of realizing not only your family's college dreams but your other goals as well.

Guest contribution by,

Elizabeth Barrett, MA, CFP®< -->

buying power. Like it or not, your children are a crucial marketing niche. Of course, the marketer's dream can be our nightmare. Who hasn't experienced the shopping aisle meltdown of a child who thinks you are the meanest parent in the world for not letting him get that new toy he saw advertised on TV? How many of us have tried to reason with a teenage girl who very seriously believes her life will be ruined by wearing clothes purchased from the wrong store? If it seems like a losing battle, it's no wonder: the average child is exposed to 40,000 commercials each year, manipulated by some of the most astute minds in the business world.

So it's also no surprise that our free-spending teens grow into young adults with poor financial habits and a skewed perspective about money and spending.  What does the future hold for young people who embrace a consumer lifestyle that can harm their long-term financial health? Constant exposure to the message that they deserve a fantasy lifestyle unfortunately leads many young adults to aspire to lifestyles their salaries can't come close to matching.

Here are some startling conclusions from a United Services Automobile Association (USAA) survey, High School Confidential:

An Inside Look at Teens and Money:

• Teens-half of whom aren't earning their own paychecks-spend nearly as much in "fun money" every month as their parents do.

• One teen in five expects to earn $60,000 or more at their first full-time job after high school or college.
• Nearly two thirds of teens expect to be millionaires in their 40s-or sooner.
• Forty-two percent of teens expect to retire by age 60.

Despite these findings, teens who learn good habits can become financially functional and successful. The present state of the economy presents an ideal teachable moment, allowing us to reinforce the lesson that our society, in many cases, is paying the price for living beyond its means. Use this opportunity to give your children an understanding of financial realities, and teach them to make responsible choices with money. For example,

if your teen gets a pile of birthday money, you can explain that without a plan, it could soon be frittered away. Help your kids realize they have choices about spending that money.

They can share it. One effective antidote for materialism is to stay mindful of the needs of others. Children exposed to the need around them in their community and the world at large have an easier time resisting that tempting pair of $90 jeans. The feeling your kids will savor from realizing the importance of the charitable donation can't be matched by any material luxury. Of course, encourage your kids to be purposeful about their giving, deciding on an amount or percentage to give and where they would like to donate.

They can save it. Teach your children to save at least 10% of their income, whether they receive it from their allowance, gifts, or a job. Aside from the obvious benefit of building their savings, developing the habit of saving will encourage them to live within their means. Offer rewards for reaching milestones in their savings, such as a monetary match or a family outing.

They can spend it. Help your kids recognize the difference between needs and wants and then choose their spending accordingly. We insisted on two rules when my kids first started making spending decisions: they had to wait at least a few days to make sure they'd still want the item, and they had to search for coupons and sales before buying anything. You could also have them list three other ways they could spend that money before they actually do.

Of course, teach your kids to use credit responsibly. They will be inundated with offers of easy credit, and they must understand the real cost of that credit and the consequences for default. They also need to know the value of their credit score and how to protect it. Let them try out credit with a loan from you for something they want, and if they default, repossess what they've bought. Better to learn by losing a small item now than a car or a home when they're older.

They can pay taxes with it. Sooner or later, we all learn that along with the privilege of living in this great country comes the duty (and in many ways the privilege) of paying taxes. Don't wait for them to be disillusioned by the take-home amount of their first paycheck. Collect a "family tax" on their income, and use it for something to benefit the whole family, like a group activity.

Parents can take heart: you are still your children's greatest and most important teachers (despite what your teens may tell you). Don't let the only messages they hear about money come from others with an agenda. Take the time to communicate your financial values to your children. Reflect on your personal financial philosophy, and be clear with yourself about your values and what you want to model for your children. Despite the efforts of clever and powerful marketing, you can counter the influence of our consumer-crazed society effectively.

Guest contribution by,

Erin Baehr, CFP®, EA   Shawnee-on-Delaware, PA< -->

I'm used to working with attorneys and have a basic understanding of most aspects of law, but we were discussing an area I'm not particularly familiar with.   As I listened to the lawyer sell himself, I became increasingly confused.  The more questions I asked for clarification, the more complicated the issue became.

It was at that very moment, while I sat there listening to him, that I realized the true value of a professional.  My job as a financial advisor, just like that of any other professional, is to make complicated things simple, so someone not in the field can understand them.  It seems that many "experts" use big words and complicated jargon to impress their prospective clients.  Instead of becoming impressed, I think most people get frustrated.

I did not hire that attorney, because I did not trust him.  He was not able to make the complicated, simple, which raised all the red flags.  Since I could not understand him, it would have been too easy for him to rip me off.  If you're seeking the paid advice of a professional, it's not your job to learn his profession, but rather his job to help you understand.  If you don't understand what you're about to buy or invest in, run for the hills.  You'll sleep better at night and always come out with more money in your pocket.< -->

To correctly estimate how much you're worth per hour, you need to first calculate how much time you spend doing things for work that you don't enjoy or wouldn't do if you didn't have to.  For example, would you go to the dry cleaner or spend time commuting to and from work every day?  What about going to lunch with co-workers that you may or may not really enjoy?  The same goes for work related functions like picnics or Christmas parties that you have to do if you want to climb the "ladder."

Would you still attend these events if there wasn't an unwritten expectation? Perhaps you would, or maybe you'd rather spend that time with family or friends?    There is no right or wrong answer.  But consider all the time you spend on work, either because you have to, or because you feel obligated to.

So to get to your real hourly rate, add up all that time and divide it by how much income you earn.  Let me give you an example and it may make more sense.  Suppose you earn $25 per hour and you work 40 hours a week; a fairly average income of $1,000 per week.  So do you really work 40 hours per week?

Let's assume you get up two hours earlier than you'd like so you have time to get ready and drive to work.  Also assume you spend an hour at lunch, when you'd rather be doing something else, and then another two hours in the evening commuting and decompressing from the stress of the day.

That eight hour day just became a thirteen hour day, and I bet that's low for many of you.  At 13 hours a day your $25 dollar wage just became $15.38 and if we take off 25% for taxes, which is probably low, your wage just went down to $11.54 per hour.  That doesn't even factor in the holiday parties, networking events or time spent buying clothes or picking up dry-cleaning.

But wait, there's more, as the popular advertising message says.  We just discussed time, but what about money you spend directly on your job?  Do you buy clothing that's just for work?  What about a nice car to fit in with your peers and the gas and maintenance costs?  Do you spend money on lunches that you otherwise wouldn't if you weren't working?  This is harder to measure, but you can get close.  The point is that you should factor in these costs and reduce your hourly wage accordingly so you know how much money you're trading your life, in exchange for your employer's money.

Now take a moment and really think about this.  Get a pencil, paper and calculator and jot down some estimates.  Seriously, do it now, and come back to this after you know your hourly rate.  There is a reason behind this exercise and when you understand it, your life and the way you handle money will forever change.

Check back for the final post where I show how understanding this is the key to a happy life.

Chuck J. Rylant, MBA, CFP^©

Strips are modifications of regular Treasury bonds. Regular Treasuries consist of two components. The principal component is a promise to pay a fixed sum at a fixed maturity date (e.g., to pay the bond's owner $10,000 on May 15, 2024). The interest component is a promise to pay a fixed amount of interest every six months until the bond matures. Treasury Strips are regular Treasuries whose principal and interest components have been split and sold separately. For example, if you want a $10,000 Treasury Strip, you can buy just the principal component of a regular $10,000 Treasury bond. The interest components will be sold to other investors. Think of a Treasury Strip as a regular Treasury bond with its interest components "stripped" away.

Thus Treasury Strips pay no interest. The buyer of a $10,000 Treasury Strip gets only a promise of $10,000 at a certain date, backed by the full faith and credit of the U.S. Treasury. In the absence of interest payments, buyers of Strips benefit from a reduced purchase price. You might buy a $10,000 Treasury Strip maturing in 2024 and pay only about $6,200.

Treasury Strips provide safety of principal: the U.S. Treasury has never defaulted on a bond obligation, and Treasury securities are generally considered safer than AAA-rated corporate bonds. They are inexpensive to buy, and once bought, there is no further cost, assuming you hold the Strip to maturity.

For retirees, Treasury Strips can fill the gap between expected income and expected expenses. If you expect to retire in 2014 with annual expenses of $52,000, along with Social Security and pension income of $42,000 per year, you can buy Treasury Strips maturing every year for 15 years, each with a maturity value of $10,000. The $10,000 per year from your maturing Strips, plus the $42,000 from your Social Security and pension, will cover your expenses.

Because Treasury Strips pay just the principal amount at maturity, covering this income gap costs less with Strips than with regular Treasuries. Strips sell at a discount to their value at maturity so a portfolio of 15 Strips, one maturing in each of the next 15 years for $10,000 each, would currently cost about $119,000. A ladder of regular Treasury securities with the same maturity dates would cost far more because they pay periodic interest as well as the return of principal.

Strips can pose one tax complication. Although they don't pay interest, the IRS treats them as if they do. According to the tax code, the spread between what you pay for the Strip and what you receive at maturity-your profit-is really interest in disguise. So each year you must report a portion of that profit as if it were income. For this reason, many ACA members advise their clients to hold Treasury Strips in retirement plans like traditional IRAs and 401(k)s, which shelters the income received from taxation every year. The tax is payable on the taxable value only when it is withdrawn from the account.

U.S. Treasury Strips aren't right for everybody. But for many clients of ACA members, Strips can be a reliable way to close the income gap in retirement. And with enough years of Treasury Strips in their portfolio, investors can afford to wait for their equity investments to recover, reducing the chance of having to sell them at a loss.

Guest contributor - Stewart Farnell, Ph.D, CFP®   Boulder, CO< -->

This will be no surprise to you, but life isn't fair.  Some people have it easier than others.  But there's one thing in life that IS fair. We each get 24 hours a day.  No more, no less.

It's how we use each of those precious 24 hours that make the difference between a great life and one that's less so.  So how much money is each of those hours worth to you?  How much money would it take for you to sell those limited hours to someone else?

Until now, I bet you've never considered how much you're time is worth to YOU, not your employer.  Most people are paid an hourly wage, or a salary, by their employer.  If you receive commission, you're still basically paid by the hour when you factor in how many hours you work to earn your monthly income.  So if you make $20 an hour than you're worth $20 an hour, right?  Wrong!  It's far less than that.

In my next post I will help you figure out just how much less it really is and how you can change it.

Chuck J. Rylant, MBA, CFP^©

Retirement plan rules are incredibly complex and change frequently, but for most plans like the 401K and IRA, you won't pay income taxes on the money you contribute until you withdraw it.  So, for example, if you earned $65,000 from your employer and contributed $5,000 to your 401K plan, you would only pay income tax that year on $60,000 of income.  This is an oversimplified example, but it helps illustrate the idea.

Now let me explain the other investments in the question.  The money you contribute to the retirement plan can be used to buy many different kinds of investments.  These can range from investing in a small business to buying stocks, bonds, CD's or mutual funds.  The retirement plan is just a basket that holds money that you use to buy investments, but it has great tax benefits.

Now on to the original question of which is better.  No one is better than the other, it's a matter of timing and making sure you have the right mixture of investments to fit your needs at the time.  The IRS generally imposes stiff penalties for withdrawing money from retirement plans before age 59 ½, so if you may need (notice I did not say will need) the money sooner, you should probably eliminate those plans as an option.

Then you need to decide which investments to buy either within or outside the retirement plan.  Here again it's a matter of how soon you'll need the money. Generally if you'll need the money within five or fewer years, stocks are probably not the best way to go and a CD, money market or short term bond are more appropriate.  When your time line is five or more years away, stocks become a better idea.

At the risk of completely complicating things, mutual funds are investments that buy all of the investments we've discussed so far--stocks, bonds, real-estate, and CD's. So you really need to examine what the mutual fund is invested in to make an informed decision.

I've tried to tackle a whole range of complicated topics and give you a basic idea of "which investment is best." Obviously there are entire books on these topics, but hopefully you have a better idea of the difference between an investment (stock, bond, CD and mutual fund) and a retirement plan (401K and IRA) so you can get closer to your own retirement.

Membership in NAPFA is granted only to Fee-Only financial advisors who are paid directly by their clients. NAPFA members receive no commissions or other rewards for selling financial products. These forms of compensation create potential conflicts of interest that my serve to undermine an advisor’s objectivity and fiduciary responsibility. It is for this reason that all NAPFA members must sign our Fiduciary Oath, in that they explicitly promise to “place the clients’ interests first.”

In addition to tough standards on client-friendly compensation, NAPFA has some of the industry’s most rigorous education and training requirements. All candidates for membership are required to submit a complete comprehensive financial plan for a full-scale peer review. Furthermore, NAPFA’s continuing education requirements exceed those of any other association of financial advisors.

“Chuck Rylant is a welcome addition to our organization,” said NAPFA Chair Diahann Lassus, a financial advisor in New Providence, NJ. “Membership in NAFTA denotes a real accomplishment for any financial advisor. We recently surpassed 2,000 members and are always pleased when we can strengthen our ranks with well-trained, highly-committed financial advisors.”

Lassus continued: “Our mission for more than 20 years has been to provide comprehensive, client-centered advice to individuals and families. Our services are provided in a fee-only manner, with no sales of any products, and with full disclosure of any possible conflicts. The superior nature of this type of financial planning is widely recognized by the leaders of the financial services industry and the media.”

For more information about Fee-Only financial planning and NAPFA, visit our Web site at http://www.napfa.org or call toll free 1-800-366-2732. To contact Chuck Rylant, visit his website at http://www.cjrylantwealthmanagement.com or call his office at 805-722-2942.

I think a better description of retirement is “financial independence.” This means different things to different people, but I suggest it means you no longer HAVE to work, because your money works for you. It does not necessarily mean you quit working, but in retirement you only do the kind of work you want to do. To get there, you need to have saved enough money so that you can live off the earnings of the money you’ve accumulated.

So have you ever estimated how much money you’d need to save—your “Number”? Most people have no idea. It’s hard to stay motivated saving for some unidentified goal, but when you have a rough idea of your “Number,” saving and investing become a lot more interesting. This is because every time you put money away, you know just how much closer you are to reaching financial independence.

Figuring out your Number is less than perfect because there are many factors that are hard to predict. Variables like inflation, investment returns, health care costs and time in retirement, can dramatically change your Number. There are many more accurate ways to forecast how much you need, but here’s a simple formula you can play with today. Estimate how much money you would need to live per month. Multiply that by 12 and divide that by .04.

For example, let’s assume you need $4,000 per month to live happily ever after. Multiply that by 12 to get an annual income of $48,000. Then divide that by .04. In this example you would need $1,200,000 invested to earn $4,000 per month for as long as you live.

It’s a VERY rough estimate, but it can give you an idea of how much you need invested to live off the earnings instead of working. This calculation will show you how near or far you are from retirement. You should do a more comprehensive retirement analysis, because this estimate is very imprecise, but a rough estimate is better than none at all.

Discover more at http://www.cjrylantwealthmanagement.com and get the FREE workbook “The 7 Secrets to Financial Independence.”

Chuck J. Rylant, MBA, CFP®

C. J. Rylant Wealth Management

Why do so many people feel they’re not on track to living the life they desire?  It’s because they go through life reacting to daily emergencies instead of proactively creating the life they desire.  You must admit that you’re so busy with today’s commitments--work, family and other obligations--that you rarely have time to plan for tomorrow.

Most people make their financial decisions in a similar fashion.  People commonly buy stocks on a whim after a “hot tip” or invest their 401k assets in the “aggressive” fund because another coworker suggested it was best.  Or they’re sold a life insurance policy as an investment instead of for its intended purpose of replacing income after premature death.  Another reaction is wondering what your tax return will be instead of proactively planning to save taxes.

According to the bestselling author Brian Tracy, only 3% of the population writes down their goals.  According to research, that small group is one-thousand times more likely to achieve their goals than the remaining 97% of the population.  Think about that number; a one thousand percent greater chance of getting what you want out of life.  That is an amazing statistic.

So why does writing your goals increases the odds of success? It’s because in order to write them down, they must be crystal clear in your head.  Once you’re clear where you’re going, then you can focus all of your energy into achieving your goals.  With crystal clear focus you will no longer react to life’s little emergencies--you’ll simply continue to follow your plan.

Although writing your goals is important, it’s not the point of this article.  In this article I’m suggesting that before you make another financial decision, become clear about what you really want out of life.  Then make sure every investment or major purchase contributes to that lifestyle.  Decide today that you will no longer wander through life reacting and instead become focused on achieving the life you want.