The College Savings Crisis

“Just put $250/month in this stock mutual fund account for each of your kids.

And by the time they’re ready to head off to college they’ll be enough to pay for each of your kids.”

Ten to fifteen years ago, that’s about the only college savings advice (or something similar) you would’ve ever received from a financial advisor. Whether it was recommending a UTMA, UGMA, or a 529 plan – stock mutual fund-based savings plans were all the rage.

The last 10 years of flat returns and downright losses has put a serious crack in market based college savings plans. And for good reason.  They were built on faulty thinking to begin with.

The premise was that if you consistently save into a stock mutual fund based plan, it would grow at a certain percentage year after year.  And by the time junior graduates from high school there will be enough to pay for college.  The growth from the mutual funds would stay way ahead of the rising cost of college.

Sounds simple and easy…right?

But as so many families have found out the hard way, the stock market gains they were promised never happened.  In fact their stock mutual funds either went down or showed zero gain.

But the devastation doesn’t end there. Because most families not only had their kids college fund in stock mutual funds but also their retirement accounts.  Double the devastation.

So now parents are being faced with the task of figuring out how to pay for college without raiding the retirement nest egg or depleting what little equity is left in the home.

But the worst part of this scenario is that it’s not over.

In fact, parents who don’t adjust and learn to grow and protect their college savings and retirement accounts without relying on Wall Street are in big trouble. Because some major warning signs are declaring it’s time to get out of the stock market.

While Washington continues to treat money like a monopoly board game, and Wall Street enjoys yet another fling of fantasy, three major warning signs are flashing right in front of our eyes.

Each one foretells of a coming market crash – the likes of which we have never been seen before.  Starting with…

Warning #1: Corporate Insider Selling

An overwhelming majority of corporate insiders are selling their companies stock.

And who better to know what’s coming than the big-wig executives running these industry-leading companies.

Profits are down.  Price to earnings shares are up (a bad thing).

The smart money (another name for corporate insiders) is getting out while stock prices are still relatively high.

As reported on cnbc.com…

“The largest companies in three of the most important leading sectors of the market have seen their executives classified as insiders sell more than 120 million shares of stock over the last six months. Top executives at these very same companies bought just 38,000 shares over that same time period, making for an eye-popping sell to buy ratio of 3,177 to one.

Clearly, insiders are seeing great value only in cash. Their actions speak volumes for the veracity for the current rally.”

Consider yourself warned.

Click here for Part II of the College Savings Crisis… in which I share two additional warning signs — and what you can do about your college savings and planning.

Regards,

Scott Weingold

Publisher, CollegeMadeSimple.com

Related Articles:

How To Make College Cheaper: Part 1

How to Make College Cheaper: Part 2

How to Make College Cheaper: Part 3

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Editor's Note: Scott Weingold has been ranked the #1 “College Financial Aid Expert Worth Knowing About” in the entire country by CollegeStats.org.  He has co-authored the book, “The Real Secret To Paying For College. The Insider’s Guide To Sending Your Child To College – Without Spending Your Life’s Savings.” Scott also publishes a popular free online newsletter, “College Funding Made Simple" which reveals insider’s tips, methods, and strategies for beating the high cost of college.

Scott is the co-founder and a principal of the widely renown College Planning Network, LLC – the nation’s largest and most reputable college admissions and financial aid planning firm. CPN is a proud member of the Better Business Bureau, the National Association of College Funding Advisors, the National Association for College Admission Counseling, the National Association of Student Financial Aid Administrators and the Student Affairs Administrators in Higher Education.

Scott, along with his college funding advisory team, helps thousands of families throughout the country with their college planning needs and offers a series of free educational webinars and workshops on “How To Pay For College Without Going Broke In The Process!” He's been featured or mentioned in The Philadelphia Inquirer, Yahoo News, TheStreet.com, Voice America with Ron Adams, Crains Cleveland Business, and on Cleveland Connection with James McIntyre.  Scott has published numerous articles and is a professional speaker who has addressed thousands of audiences online and offline throughout the United States.  His actionable insights and candid, open approach have earned him & his team numerous media interviews, citations, and speaking opportunities, and his free online video workshop is one of the Internet’s most widely viewed pieces in the college funding space.