Unknown Speaker 0:02

You're listening to the winning to wealth podcast where you'll hear real stories from real people who are on the path to building real wealth. These stories will show you how to earn more money and pay off debt, start investing and make better money choices so you can build wealth for your future. Now, here's your host, Michael Lacy,

Michael 0:25

what's up? What's up? What's up teammates? This is Episode 31 of the winning podcast. And it's an important episode because so many of the debt free stories on this podcast start with student loan debt. Now, according to a recent Forbes article, student loan debt in America topped $1.56 trillion for 45 million borrowers earlier this year. And this puts student loan debt second in American debt totals just behind mortgage debt. See we have a real problem on our hands.

Today's guest wants to be part of the solution. So my guest this week is Jeremy from college backer and college backer. His mission is to make college more affordable for every American family. College backer is doing some absolutely fantastic things to help you parents out there who want to save more money for your kids college so that they don't end up struggling through their 20s with student loan debt like a lot of you may have. So again, I reached out to college backer because as a parent myself, I know how confusing trying to figure out the best ways to save for college can be and I believe that college backer does a really great job of making it easy for parents to get started. So this is definitely an episode where you want to open up the Notes app on your phone and jot some things down so that you can start doing research and you can get started putting away money for your kids education, a sap also college backer has a special promo just for you.

Unknown Speaker 2:00

that we'll get into as well. So be listening for that. But make sure you go to the show notes page over at winning to wealth comm slash Episode 31. That's where I'm going to link to everything Jeremy mentioned in this particular episode. Also, if you're new to the show, be sure to reach up and tap that subscribe button so that you can stay in the loop on any new episodes as they release. But let's jump right into this interview with Jeremy from college backer.

Michael 2:29

So, Jeremy, thank you so much for coming on and representing college backer. Great way for parents to save for college tuition for their kids. But jump right in with the first question. Can you explain what exactly a 529 is for those who may not be aware?

Jeremy from CollegeBacker 2:47

Yeah, of course, Michael, and thanks for having me once again. But a 529 plan is an investment vehicle that can be used to save for qualified education. So that can be K through 12 College for most institutions.

In the United States, and I think of it as a Roth for college, so you put your money in post tax, and then the money in your 529 plan grows free of taxes from the federal level on the state level, depending on what state plan you're in. Okay, so can you talk about just some of the benefits of utilizing a 529 over the some of the other options out there like a savings account or bonds or things like that, of course, so in terms of some of the advantages of ultra nine plan has is with us, for example, college back your money is placed into passively managed low fee ETFs that are age based. So as your child becomes closer to college age, the financials become a little bit more conservative. So a little bit more bond heavy, a little bit less equity heavy, so there's some capital preservation. So compared to you know, a savings account or a CD or bonds, you're going to make a ton more money in the stock market over a long period of time, as you know, kind of historical

have shown such a huge advantage in terms of capital growth, you also have a huge tax advantage. So as I mentioned, the money grows tax free at a federal level. And most states do offer tax incentives as well. So you know, your money is growing faster, and you're paying less taxes, if any tax at all on that capital, and you have a ton of flexibility in investments in terms of what stock what kind of stock portfolio you'd like to pick. So those are the big advantages over other traditional savings accounts.

Michael 4:28

So I have a two year old and a lot of my listeners are, you know, parents of young kids. So the next question I have is when is the best time for parents to start actually putting money away for their kids tuition?

Jeremy from CollegeBacker 4:41

Yeah, it's a great question. The best time is right now or in your case two years ago. So you know, the younger the younger your child is, the better you know, most of your listeners are probably, you know, familiar with compound interest. So over time, your money is going to compound the gross uni compound and kind of well, we always like to say There's, the sooner the better. So we actually have a large, decently large portion of our customers who are saving for future babies. So before their kids are even born, they have account set up. So I personally fit into that category. So I have, you know, my fictitious Jeremy Jr, child, and whenever he or she is born, I will have money already set aside and that money will already be growing. So the sooner the better. You know, like I said, our plans are set up where they are age based. So the younger the child is, the more aggressive the portfolio is. And those are customizable as well. But yeah, the sooner the better, especially with the changes in the sense of 5.9, GPUs for K through 12 and college, especially if we're going to use some of that money for K through 12. You know, it's even more important to start saving sooner rather than later,

Michael 5:47

going on the opposite end of the spectrum there. I mean, is it ever too late? Like let's say I've got a kid that may be a freshman or sophomore in high school, and I hadn't started saving it, is it? I mean, is it still a good time to put money aside or is she I'd do something different.

Jeremy from CollegeBacker 6:01

Yeah. So unfortunately you miss part of the boat. But I definitely think if you think about you know, in your example that kids a sophomore in high school, let's ignore grad school because grad school is a fantastic opportunity in grad school might be 10 years down the road for you, for example. So might be a great opportunity for you to say for his or her grad school, but just thinking about, you know, traditional four year college, you know, if they're a sophomore, there could be six to seven years of a time gap between now and when you're paying for their final tuition bill for their second semester of senior year. So I think it's a fantastic time to think about, Hey, you know that that last tuition bill might be figures plus i got room and board. So in all of a sudden you start thinking back, you know, hey, that's still seven years away from if your kid is a sophomore freshman High School, and you knew even if your child's a freshman or finishing their freshman year right about now, you know, it's still gonna be two plus years until that senior year starts. So it's definitely still viable to get three years of tax free growth for them to put up a better spot down the road.

Michael 7:01

Okay. So I know that when I talked to other people about, you know, starting a 529, doing the research and all that stuff, a lot of them kind of get overwhelmed with all the options out there. Because there's two things you can do. You can go with your state's plan, you can go with another state's plan. So how do you know whether you should open up your state's 529 plan or another state plan?

Jeremy from CollegeBacker 7:23

Yeah, so a lot of it depends on what state you're in. So some states, as you mentioned, do offer very generous tax incentives. Some states do not offer tax incentives in some states offer tax incentives to only signups for their own states plan. So it's kind of a very state by state dependent view, which is part of the reason it's very, very confusing. And within each state, most states have that kind of a direct plan, which you can go to the website or sending paperwork and sign up immediately, which we always recommend or kind of an advisor sold plan, which is going to give you advantages where your financial advisor is going to better be able to answer questions like you know, how much should I be saving and things Like that, but from a fee perspective, you're gonna be paying about, you know, three to four x the fees just given us an advisor. So plan. So it's definitely a very, very state by state dependent Nikolic backward taking more of a simplistic approach and saying that, hey, the most important thing is that you are in a five to nine plan. And then for some of our more sophisticated investors who really get into the nitty gritty, you can have as many five to nine plans as you want. So some of our our clients, you know, utilize their home state for tax for tax benefits, if they do live in a state that does offer generous tax incentives. And they use us for some gifting and family and other options that we can get into that we provide. So first of all, you can have more than one five to nine plans, and it's very much a state by state dependent. So like some of the other questions. It's a little bit unfortunately dependent on your circumstance. So there's not really a one size fits all approach. But I always say the best thing is to put your money somewhere because the you know, the sooner you put your money in, the more will grow and anything is better than sort of sitting in A CD or you know, sort of spending your money on a sports car or something.

Michael 9:04

Mm hmm. Right. Right. So another question that I have I mean, you mentioned having multiple 529. So let's say I have multiple kids, right? Is it the right move to have each one for each kid? Or should I just lump it all into just one 529 plan,

Jeremy from CollegeBacker 9:20

you can definitely lump it all into one 509 plan. However, we always suggest to set up a plan for each of your children. Because when it becomes time to actually withdraw your money to pay for tuition, or books, or whatever it might be, it's very, it's much easier to say, Hey, I'm paying for child one for Shell two. And just from a kind of perspective of aligning, you know, your children, it's very easy to say, Hey, I have $5 in this fun $10 this 115 dollars in this fun in the sense of sort of allocating, especially as you know, your kids are different age. If I had $30,000 let's just say in my 529 account for for all three kids. You know, how do you figure out of the $30,000 Want to give the kid one verse get to verse kid three who might only be in middle school, we always suggest having a plan for each child to keep things very kind of bookkeeping wise, very clean, and also to enable you to better allocate each kid their own their own funding.

Michael 10:17

So I have a two year old daughter. So let's say my daughter grows up. And she decides that you know what, I don't want to go to college or I want to go to trade school, I want to do something different. What happens to the money that I've spent, you know, the last 18 or 19 years setting aside,

Jeremy from CollegeBacker 10:34

there's a lot of flexibility built in five or nine plans. So if you had multiple children, you could easily transfer the money from your daughters to another daughter or son, things like that. You can also skip a generation. So your daughter's future kids so you know, your grandchildren could use the money and that money would sit there and continue to grow tax free. So by the time your grandkid comes, you know, hopefully that money has doubled if not tripled, even without making more contributions. So it's great flexibility that And you can, you know, like I said, you can transfer it to other people in the immediate family. And then worst case scenario is you can withdraw, and you pay a 10% penalty on the investment gains, which really puts you in kind of a similar boat to using a traditional brokerage account, where you just sort of pay your usual taxes and your capital gains and move on.

Michael 11:19

Okay. And so I mean, at the time my daughter enrolls in college, does she automatically get control over that account, or what happens when she reaches the age where you know she enrolls in college?

Jeremy from CollegeBacker 11:32

So unlike, you know, gifting you GMA or UTA as the owner of the fund, you you own it for for life. So your daughter would be a beneficiary, you'd be the account owner, which means you are the one who really gets to decide, you know how to use the funding, so you're always the owner, and she's always beneficiary so it doesn't go to hurt 18 or 20, or any age, it's always in your name, a beneficiary

Michael 11:59

and it isn't Is there a contribution limit to a 529? Like there is with like, you know, investment accounts like Roth, IRAs, 401, K's and things like that.

Jeremy from CollegeBacker 12:07

Yes, there is there is a limit. And for single, single contributors, the annual limit is $15,000. But you can give up to $75,000 over five years. So for the example we were talking about earlier, where you know, your kids are already a sophomore or a freshman in high

Michael 12:26

school, and you're kind of you know, behind the times, you could put in, you know, if you had the money, you could put in $75,000, tomorrow, but you can only put in $70,000, every, you know, five years or $15,000 a year, whatever is easier for you. Gotcha. Okay. Okay. So I guess my next question then would have to be let's, let's say my daughter, she's brilliant, right? she grows up, she gets the scholarships and grants and all these other things. Even financial aid can a 529 have a negative impact on her eligibility for financial aid?

Jeremy from CollegeBacker 12:54

Yes. So 529 plan is considered part of your You know, expected family contributions as you think about your federal your federal student assistant. So the max it can impact is about 5%. So 5% of your 500 assets will be counted towards your EFC, which is your expected family contributions. Now relative to like a, you know, uniform gifting act to minors and things like that, that's like no, typically 20% is counted. So it's much better, but it can negatively impact your financial aid just given you know, there is more kind of contributions expected to go to your son or daughter.

Michael 13:33

So once my daughter is actually enrolled in school, are there any additional expenses that I can use my 529 to cover for her?

Jeremy from CollegeBacker 13:42

Yeah, so definitely covered, you know, your tuition, also room and board. So you know, textbooks, all kinds of housing, all those things that can be used to cover and in terms of you know, once you get into specialized things like tutors and things like that, you know, you feel a little bit more reading into into what exactly a cover And depending on who the tutor is, and things like that, but there definitely is a ton of flexibility in terms of what it can be used for. And then in terms of using it, you know, it's a pretty streamlined simple process, where you withdraw the money, and then you have sort of flexibility to utilize it as you need with the caveat that it's used towards, you know, some sort of educational expense.

Michael 14:21

So, okay, it has to be used towards an educational expense. So how is that track? Like, do I have to submit receipts anywhere or anything like that, like, how is it or is that more of like an honor system thing?

Jeremy from CollegeBacker 14:32

Yeah, I mean, it's, it's with the government. So I don't want to say it's an honor system, but it's not it's not like, you know, an expense account where you have to sit there and, you know, submit stuff to the state or to the federal government. But you know, if you were audited, obviously you want to sit there and say I I pulled out $10,000 to pay for my son or daughter's tuition of $10,000 and the books or whatever else, so definitely, I would highly recommend, you know, keeping some sort of track on it, but it It's not a system where, you know, you got to sit there and submit paperwork somewhere.

Michael 15:04

So something that you touched on earlier was the adviser method where you know, the fees and things like that could be your way higher than with a service like college backer. So what kind of cost and fees are typically associated with, with a 529, specifically with college backer and other options that you've already mentioned?

Jeremy from CollegeBacker 15:24

Yes, so in terms of 5.9 plans, in aggregate, they typically charge in a un base fee. So similar to you know, if you go to Vanguard or any brokerage, they're going to charge you basis points or a few basis points or even a few hundred basis points depending on what funds you select. So it's a similar setup. So we always suggest plans that have very low expense ratios. So you know, your your capital gains are not being eroded by expenses. And then in terms of how college Packer makes money, so we provide, you know, in our view, a premium service, but we also charge very various low costs so it's free for lifters. And then for owners, you can sign up with a kind of a voluntary discretion for as little as $1 per month. So you know, that's on top of very low expense ratios. But with cash back, you get a ton of value. So some of the things that we haven't touched a ton about in terms of you know, what college backer specialty is, you know, we enable seamless gifting. So, you know, in terms of paying for college, it's daunting, you know, you have a two year old, you're probably looking at, you know, hey, this is gonna cost a ton. You're gonna chart the, you know, the famous chart that says, you know, college is just, you know, the charts up into the right as fast as possible thinking, How am I ever going to be able to make a dent in this mountain, and that's where a college backer comes in and says that we're really foster round gifting. So you know, whether it be grandparents, aunts, uncles, neighbors, things like that, really enabling them to get a crack at helping you out. So all of a sudden, you know, that mountain becomes a little bit smaller, and mid April released a product called backer bucks, which gives you cash back directly to your college savings plan just by shopping at brands you love. So you can go to Walmart and get 1% back, Ace Hardware, a bunch of other brands, we have 70 plus brands that you can shop at. We're giving a portion of your spend directly into your college savings. And we're also rolling out a bunch of other features that are aimed around finding new ways to help you contribute. So all of a sudden between you know grifters birthday parties, you know, we enable lifters to use credit cards, for example, so they can seamlessly give you know $15 from their phone without ever having to reach into the wallet because their credit card saved a bunch of things like that. So you know, between grifters and other contributors and finding ways to make new contributions. You know, our goal is to all of a sudden make that mountain that you're trying to climb much more doable by finding other funding sources that you're already doing and other people that want to support your daughter, whether it be family members or friends at birthday parties and things like that. You know There's a bunch of stats out there and you know, I have a four year old niece to nephew and every year their house their houses covered in toys, and a lot of toys they never use. And I got him a basketball hoop I think two years ago and I think they use it that night and haven't touched it since. So, you know, there's a lot of just kind of, you know, wasted money and spent on toys that can go other places. And that's what we really specialize in helping you climb that mountain by finding grifters and finding other ways to make your contributions last longer. And then kind of close it out is in terms of the fees, you know, with the low fee structure, those contributions are growing much faster. Because you know, if you're making your seven 8% a year, and then the fees are super small, they're not sort of taking out of that that big, then they're not taking a big cut and starting in $1 a month you know all the all the features of yours.

Michael 18:51

So one of the things that I really liked that you said there was how college backer makes it simple and easy for family and friends to help parents save for college. I mean He talked about just being able to do it from your phone, you know, without ever pulling out your wallet. But one of the things that I know I struggle with personally is communicating this to family and friends and trying to articulate the value in contributing to a 529 versus buying random stuffed animals and basketball hoops and things like that. So do you have any tips for parents like myself who are trying to get our family members and friends to see the value in contributing to our kids future versus just buying some random toys?

Jeremy from CollegeBacker 19:30

Definitely. So every every child that signs up and this is kind of hitting on an earlier question about should I have one account or you know, if I have three kids three accounts, so every child that signs up gets their own personalized gifting page. So you can throw the picture on a little bit about them a quote, you know, we have, you know, families do whatever they want that and it's very seamless to on the end of a birthday invite, hey, you know, similar to in lieu of gifts, you know, please contribute the same amount. However you want to word it to, to, you know, to their five 29 plan, one click, they go there they see the picture, they contribute. So we kind of make it seamless with having that gifting page, and then also grifters have the option of creating their own page. So for grandparents and aunts and uncles and sort of frequent contributors, I call them, they're able to log in and sort of see their contributions. Unlike anywhere else, the gifts are actually having an account, you can log in and can see it. So, you know, I'm like, if I give you $100, check and say, hey, go put it in your daughter's brokerage account. I really don't have outside of that one. You know, hey, you know, I get thank you note from your daughter. Oh, she's two, but when she's five or so she'll send me a thank you note, I guess. But you get that one time, hey, you know, here's $100. You can see the kid open up and there's a smile, but having more of like kind of a transaction history and things like that you're in it, right? You're part of the team. And that's, I think what we're trying to build, so from your perspective and asking someone to contribute to your team that feels a lot better than sort of being like hey, can you contribute to My kids college. And you know, that is kind of a weird conversation. And we try to use, I guess, technology to make that conversation a little bit easier because it's very streamlined. And they feel part of the team, and then all of a sudden for next birthday, or we have a ton of grandparents who have recurrent contributions and things like that. And they go in and they check on their status, their their gifts, and they feel like they're part of the team.

Michael 21:23

So with my daughter right now, I do have an existing 529. So what should I look for as I'm analyzing that plan to make sure that I'm in the best plan possible for myself?

Jeremy from CollegeBacker 21:33

Yes. So I think the first thing is I look into the fees, just to make sure the fees are lowest in the industry. That's the first thing look at because that's the one thing that's going to eat away at your interest, most of your interest and your your overall balance over time. I'd also make sure the plans are each base and kind of fit your risk profile. We offer very seamless, you know, kind of a one or two questions and sort of put you in a profile that matches you, but some people want more recent one risk and make sure it's a base because let's just say your kid is 20 in a junior in college, you know, I'd want my money to be safer, especially in a COVID time, you know, I wouldn't want to be sitting there saying, oh, going into senior year 20% of the money that I thought would cover a senior, his or her senior year got wiped away. So I'd make sure it's in a base plan. So you're kind of protected from that downside risk. And then I look into your tax advantages for your state to figure out to make sure you're optimizing that. So those are like the three biggest things I look into in terms of evaluating your state plan. And then you know, kind of the other the other things to look into is, you know, do I like the plan? Do I feel like I'm getting gifts or so I thought I'm getting value. And then from there, you kind of make a decision of did I pick the right plan. And the nice thing about switching five to nine plans is it's, it does involve a little paperwork, but generally speaking, you know, it's not terribly difficult to switch plans. And you know, in your case, if your daughter's too, you know, you could still have 16 plus years. before you're if you're using money for college, you're going to touch it. So it's definitely better to, you know, similar to investing early, it's better to make that that positive switch early.

Michael 23:07

Let's say I go through that checklist, right? And I realized that like, Okay, I'm not in the best plan for my kid, and I'm listening to this interview, and I think you know, what college backer is probably what I should do, how would I go about making that switch from another plan into college backer.

Jeremy from CollegeBacker 23:23

So we, we make it pretty seamless for you, our customer support team will help you every step of the way. So I'd say you know, shoot us an email, and we'll help you roll it over. Generally speaking, all we need is, you know, an account statement for each one of your children. We do all the legwork in terms of filling out the paperwork, you sign it, and then send it in or send it back to us, we send it in for you. And then all of a sudden, about three weeks to four weeks later, your money's transferred to us and all of a sudden you get all the great advantages that that we offer all our customers,

Michael 23:55

okay, so do I need to be a really seasoned investor to get started With college backer or is this something that's simple enough that pretty much anybody can do it?

Jeremy from CollegeBacker 24:04

Yeah. So our product is designed really for more kind of the novice investor, and the sense that it's designed for rookies, we definitely offer a ton of customizations, if you really want to get into the nitty gritty, but only 30% of American families currently know about five to nine plans. So there's a huge mess in the market. And I think a lot of it is because they're very confusing. You know, we've talked about every single state has different tax benefits. States have multiple plants, and there's just a lot of confusion. I think that's a lot of where people have said, Hey, this isn't for me, then all of our financial advisor who can sit there and kind of suss through all the details and tell me Hey, this is the right plan for you go sign up. So it's definitely built. You know, we're sort of we have a lot of customization for people who want it. But it's definitely built around sort of the the rookie investor who really wants a good place to put their money, watch it grow and then be able to ask backers and gift errs and find other ways to make contributions to California. Awesome. Well, hey, Jeremy, this has been incredible. I've learned a little bit myself. And hopefully the listeners have learned a lot as well. So I do want to give you an opportunity to talk to the listeners about just one of the offers that you guys wanted to share, and any other benefits from college backer that we weren't able to cover today. Yeah, so absolutely. So you know, the advantages, I think we talked about a lot of them, but really, you know, it starts with the gifting and being able to kind of build out your team. That's, that's a huge one. And then it's the other ways to make contribution. So we talked a little bit about backer bucks, which is the cashback for brands you love. And we're also offering in a ton new way, a ton of new ways to increase your contributions over time and also get more from each contribution. So we're really focused on helping you find more value. And the third pillar is hitting a little bit more into like, kind of the goals and matches you know, earlier you asked a question around, hey, how much do I need to save and things like that? There's never a a one size fits all, but we really want to help our customers at scale. figure out a way to easily say hey, this isn't going to be perfect but rule of thumb I should be looking at saving this or as I might, as my salary grows over time, I should be looking to save this or that or whatnot. So really looking to help them out on all three friends there and in terms of a special offer for your listeners, you know, if they visit www college backer comm backslash winning wealth will give them a $15 match for the first contribution so you know as part of a special offer for your listeners.

Unknown Speaker 26:33

Awesome. Well, hey, thanks Jeremy for taking the time to come on and share just how simple and easy college backer makes it to get started saving for our kids college education. And just to recap that offer it's a $15 match when you sign up for a 529 with college backer and you make your first contribution and to do that you go to college backer comm slash winning two.

Michael 26:56

Now for this week's winner of the week, the first thing is to do Do some research if you still have any questions about 529 or college backer as a result of hearing this episode, and if you find college backer to be a great fit for your family, go ahead and sign up and take advantage of that offer. I'll be honest, after spending some time talking with Jeremy and doing my own research about five to eight nines and college backer, I actually made the switch to college backer for Allison's 529 and I gotta say, I couldn't be happier with how simple this is in comparison to the other 529 plan I had. It's literally a night and day difference. Everything Jeremy said is true. It's an app on your phone. You punch your card in Submit. I mean, it's so so simple. And as a result of my personal experience, college backer will be a winning to wealth recommended option for college savings going forward. But as I always say, don't make investing decisions just because I do it or someone else tells you to do so you have to make the right decision for your family. So when If you still have questions after hearing this interview, make sure you get them answered and then make your decision. And if you heard this interview and thought, you know what, I've heard enough, this is the best fit for my family like I did, head over to college backer comm slash winning to wealth and get started because as Jeremy said, the best time to start putting money aside for college is right now. Now if you're looking for more tools and tips to help you on your wealth building journey, be sure to head over to winning to wealth.com slash playbook and grab my free book. It's filled with super simple, very clear action steps that you can take starting today that will help you be in a better financial position tomorrow. But that's all the time I have this week. So until we talk again, keep racking up those wins one at a time. We'll talk soon.

Unknown Speaker 28:53

You've wrapped up another episode of the winning to wealth podcast to learn more about how you can start making winning Money decisions head over to winning to wealth.com