Four Hawaii families demonstrate how to affordably raise children in Hawaii, while saving for their futures.
College tuition rates are rising faster than the nation’s inflation. It’s no wonder many families are worried. Annual average tuition and fees at four-year, private colleges increased an average of 4.5 percent (to $28,500) in the 2011-2012 school year.
Meantime, tuition for in-state students at public, four-year universities jumped an average of 8.3 percent (to $8,244), according to the College Board, an organization that helps families with the college-entry process.
These amounts don’t include room and board. If you add housing costs, parents spent an annual average of $17,131 for public universities and $38,589 for private colleges in the past year.
What’s the good news? It is possible to save for college, even in high-priced Paradise. We sat down with four families with children between the ages of 5 and 20 for a candid look at their financial solutions.
 From left: Dawn, Ami, Keean, Gale and Ruben Braceros. |
Braceros Family
Goal: Reduce college expenses through grants, scholarships and affordable loans.
A left-handed male with Filipino-Japanese ancestry, 19-year-old Keean Braceros qualified for niche-college scholarships. But it was his good grades and leadership—class president, National Honor Society president and yearbook editor—that scored two academic scholarships and a grant to the University of Portland (UP), where he is studying biochemistry.
“[In my senior year at the American Renaissance Academy (ARA) in Kapolei], I started applying as soon as I discovered scholarships I met requirements for,” Braceros says.
Cindy Montgomery, ARA’s director of college counseling, suggested he find scholarships on fastweb.com and the Hawaii Community Foundation’s website. She also helped him create a profile of academic and extracurricular achievements.
Montgomery then guided his mother, Gale, through the Free Application for Federal Student Aid (FAFSA), a lengthy document used by colleges to award grants and loans. Gale worked closely with the university’s financial aid office to secure Stafford loans.
“The financial aid journey was very new to me,” says Gale, who was a single mother of daughters Dawn and Ami before marrying husband, Ruben, 21 years ago. “Due to a tight budget while raising my children, we didn’t plan ahead.”
Ruben is a storeroom clerk for the City & County of Honolulu. She is a program supervisor and site coordinator for Weed & Seed Hawaii, an anti-crime program of the United States Attorney - District of Hawaii and the YMCA of Honolulu. They live in Pearl City.
Keean, their third child and the first to attend college off-island, also was accepted to the University of Washington and Hawai‘i Pacific University. He chose Portland, a city he has always admired.
“He was very determined to study away from home to experience the Mainland and its opportunities,” Gale says. They have no family in Oregon and did not visit the campus prior to enrollment.
Gale fought hard to pay for Keean’s choice school, despite its $47,000 annual price tag for tuition, boarding and books. Annual scholarships and grants have lowered their college expenses to approximately $23,800 per year.
Her first advice for cash-strapped parents: Start financial planning early and consult high-school counselors. “There are people who want to help if you are willing to be proactive,” she says.
Her next tip: Be aware of application deadlines. “Late fees may be at stake, or not earning a great opportunity for financial aid at all,” she says.
Gale’s final piece of advice is to stay committed. “You have to want it and be willing to sacrifice time and energy to find these financial aid opportunities,” she says.
The sacrifices have paid off. Keean feels at home in Portland and lauds his professors and classmates. “UP cares about your needs to achieve goals you set for yourself,” he says. “And it’s really cool to meet people from around the world, because I can share my culture with them, while learning about theirs.”
Strategies
- Have your child apply online for scholarships based on academic merits, ethnicity and quirks.
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Together with your child, seek advice from high school counselors and the college’s financial aid office. See honolulufamily.com for more information on where and how to apply, as well as local workshops you can attend.
 From left: Jack, Quinton and Joanna Lee. Sheldon, not pictured, is in England. |
Lee Family
Goal: Pay for college expenses and save for retirement.
Some families drown in debt to pay for their children’s prestigious college degrees, but Joanna Lee has advice for parents: “Just send them to schools you can afford,” says the mother of sons Sheldon, 20, and Quinton, 16. “The bottom line is that your children learn how to analyze and process the information they learn in college.”
Her oldest son, Sheldon, a sophomore at Brigham Young University (BYU) in Provo, Utah, is on a two-year hiatus to serve on a Mandarin-speaking mission in England for The Church of Jesus Christ of Latter-Day Saints. He graduated from Punahou School in 2010 and is on track to graduate by 2016, with an electrical engineering degree from BYU. Quinton begins college in two years and most likely will serve on a two-year mission as well.
The family’s financial position is unique. Joanna and Jack have two children but will fund 12 years of college-related expenses: Four years of undergraduate degrees and two years of church missions for each son.
“Many of our friends are worried about how they can save enough for college and their own retirement, and they are troubled by the high cost of colleges and the rising cost of living in Hawaii.” Joanna says. Some are considering second jobs or finding other ways to make money.
Juggling multiple jobs and investing in stocks and real estate are how Jack and Joanna pay for their kids’ education. The couple own and live in a two-bedroom condo in Makiki. They also own and rent eight- and five-bedroom homes in Lā‘ie and Utah, respectively. When Sheldon returns from England, he will live in the Utah home.
Jack and Joanna are business partners in Wireless Rentals of Hawaii Inc. and recently launched a dietary-supplement line. Joanna, a realtor and accountant, manages the family’s finances. Jack takes culinary classes at a community college to further their business dreams.
“We were never rich, but we had enough,” says Jack, adding that the majority of their savings in the past two decades went to Punahou and college savings. BYU Provo’s $6,000 annual tuition is a fraction of Punahou’s annual tuition of $16,500.
The Lees are role models for practical living. They are content driving economy cars and do not subscribe to cable TV. Big-ticket items are bought with credit cards and the balances are paid off each month.
Recently, they remodeled their Lā‘ie and Makiki properties, doing most of the work themselves.
“Jack read books and watched YouTube videos to learn how to do projects and fix things around the house,” Joanna says. “He even taught these skills to our children!”
Strategies
- Earn extra income through stocks, real estate investments and business ventures.
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Invest in rental properties in college towns close to your children’s school. Rent the home to students, and let your kids live in it while attending college.
 Clockwise from top: Kyle, Kyla, Kason, Kiera, Karter, Kaylen and Mahele Nitahara. |
Nitahara Family
Goal: Teach children fiscal responsibility, so they can fund their own college education through hard work and future scholarships and grants.
When Kyle and Mahele Nitahara receive paychecks from work, family members also are paid. Kyla, 14 years old, Kaylen, 13, Kason, 10, and Karter, 8, receive allowances based on their ages. The youngest, Kiera, 5 years old, will get regular allowances when she turns 8.
The Nitaharas set strict fiscal guidelines for their children. They must save 10 percent of their monthly allowance and tithe 10 percent to their church. They may borrow from their parents, but no more than 50 percent of the amount they have saved. Payment plans are determined prior to loans. Here’s the best part: Each child receives a year-end bonus, equal to the amount of his or her total annual savings.
“We set rules on what we, as parents, are responsible for financially and what the kids use their money for,” says Mahele, who is on a federal grant to teach fifth-grade science, technology, engineering and math (STEM) at public schools.
“Necessities are provided by us, of course,” says Kyle, a property manager for Hawaiian Island Commercial Ltd. “But if they lose anything or want an upgrade, they must pay for it themselves. We try to promote independence and self-sufficiency, holding them to higher standards from an early age.”
Although Kyle and Mahele diligently save for their children’s education, the husband and wife hope the fiscal lessons prepare their children for the harsh economic reality of college tuition. They also hope for college scholarships based on their kids’ high academics or extracurricular activities. The kids aren’t required to use their allowance for college, unless that’s what they personally want to do.
The five children participate in jiu jitsu, judo, football, soccer, water polo, dance, hula, robotics and Cub Scouts. They take breaks from sports if grades slip. The three eldest are in a private school, the two youngest in public schools.
Mahele and Kyle spend weekends and evenings participating in, and driving to, their children’s activities. Quality time, not assets, is their greatest investment. “College and most everything in life won’t seem as hard if they know we support and love them,” Kyle says. “None of that can be achieved without spending as much time as possible with them.”
Raising five children in high-cost Honolulu requires creativity. Mahele plans weekly meals around sales at Costco and Sam’s Club, and the kids wear their siblings’ hand-me-downs. “We’re doing all that we can to make the best of our situation,” Kyle says.
Saving for college was tough when the newlyweds lived paycheck-to-paycheck. Now, with dual incomes, they aggressively save and soon will transfer money-market funds to Section 529 plans.
Mahele urges new parents to save for college, albeit in small amounts. “You may think that when they are just babies, you have a lot of time, but the years go by fast and before you know it, they’re filling out college applications,” she says.
Strategies
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Enforce rules on how your children use allowances.
- Be involved in your children’s academics and extracurricular activities.
 From left: Andrew, Bernard, Amanda and Lori Yip. |
Yip Family
Goal: Afford private-school tuition and save for college.
In the first three years of their marriage, Lori and Bernard Yip diligently saved for a down payment on a two-bedroom, two-bathroom Makiki condominium, purchased in 1998.
The following year, after the birth of their first child, Andrew, the couple immediately began saving for his education. By the time Andrew started preschool, the Yips had enough to pay for tuition.
Lori and Bernard still live in the same condo with their children, Andrew, 13 years old, and Amanda, 9, who occasionally have asked their parents for a pet dog and a larger home.
“Now, the kids understand that we sacrifice by living in a smaller home so we can afford to send them to private school,” says Lori, marketing director for sports-marketing group 141 Premiere Sports & Entertainment. Buying affordable digs in the suburbs would mean a higher mortgage and gas expenses, longer commutes and less quality time as a family, she explains.
Education is the family’s top priority. Although Lori’s parents paid her college tuition in the early 1990s, she had three part-time jobs to “pay for extras,” including study-abroad programs in France and Japan. Bernard, a senior wealth adviser for First Hawaiian Bank, and the son of Hong Kong immigrants, funded his own college education through grants and scholarships.
In five years, Andrew will graduate high school, Amanda, in eight. To pay their kids’ college tuition and save for their own retirement, Lori and Bernard squirrel away funds in a well-diversified portfolio. They have Coverdell Education Savings Accounts with maximum annual contributions of $2,000 per child; a Roth IRA for retirement or tax penalty-free college savings; and non-qualified mutual funds “to use for practically anything.”
Lori and Bernard try to maximize annual contributions to the Coverdell and Roth IRA, and invest leftover money in the non-qualified mutual funds.
Bernard is the family’s money manager. “My husband is very realistic about our long-term financial planning, and each month, he figures out our expenses and what we can afford to spend and how much to save,” Lori says.
Saving for college is “an enormous effort,” Bernard says, citing the stock market’s volatility over the past decade. “Our investments have not been moving too far, and we have a lot of catch-up to make up the difference.”
To reach their goal, the Yips adhere to a strict, monthly budget so expenses don’t exceed cash flow. They have basic cable TV, no Disney Channel and Cartoon Network.
Lori packs homemade lunches for the family, unless she is busy with work. “Last year, Andrew was fortunate enough to work in his school cafeteria in return for daily lunch meals,” says Lori.
Strategies
- Open college savings accounts when your children are born, and carefully manage your family’s investment portfolios.
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Live below your means, while reducing monthly expenses.
Seven College-Saving Strategies
Pay for college without going broke. Local experts weigh in with sound advice for parents.
1. Invest Before Kids Arrive
Set financial goals for homeownership, retirement, future children and education. “This isn’t a onetime conversation, but an ongoing one,” says Brian Enoka, president and founder of Island Wealth Management. He has clients who open college savings accounts prior to having children. If a couple wants one child in five years, with $80,000 earmarked for college, they must save $155 per month for 23 years at 5 percent growth, he explains.
Not saving for college forces some couples to refinance their mortgage or use home-equity lines to pay for tuition. “They retire later or live on less when part of their retirement income pays for their mortgage,” he says.
2. Invest in a Section 529 Plan
A 529 is a state-sponsored savings plan with tax-exempt withdrawals used for college expenses. The majority of 529 plans are age-based funds that start aggressively and slow down as your child gets older.
If your child is at least a decade away from college, “Choose an allocation, and stick to multiple cycles,” says Cris Borden, director of Kobo Wealth Conservancy.
3. Invest in a ESA
A Coverdell Education Savings Account (ESA) is a tax-advantaged, savings program for college and K through 12 expenses, with an annual maximum contribution of $2,000 per child, as long as the contributor’s annual income is less than $95,000 ($190,000 for couples).
At the time of this writing, the provisions were set to expire in 2013. Unless U.S. Congress intervenes, K through 12 expenses will no longer qualify, and the annual contribution will fall to $500.
Regardless, investing in any education fund is a smart move, says Rhodora Pagay, financial adviser for Edward Jones. “You’re still ahead of the game by a few years,” she says.
4. Involve Family Members
Ask grandparents, uncles and aunts to help grow your child’s college fund. “Instead of $300 to $500 on toys, which we will throw away, consider the gift of education, and a smaller budget for toys and clothes,” Pagay says.
5. Save Extra Income
Is your toddler potty-trained? Did your kid’s braces come off? Put these funds in their college-savings accounts. Did your children receive checks for Christmas? Contribute a portion to their college accounts. The same goes for income generated from eBay, Craigslist and garage sales. You won’t miss the money.
6. Live a Simple Life
If your family slashed its budget and reduced expenses in response to the “Great Recession” that began in 2009, keep it up. Disconnect your home phone and reduce your cell phone’s monthly payments. Stop your cable TV viewing habit and plant a vegetable garden to reduce grocery bills. If your family agrees, move in with parents, while renting your house to tenants who pay the mortgage, Enoka says.
7. Apply to Western Undergraduate Exchange Schools
State-run colleges and universities that participate in the Western Undergraduate Exchange (WUE) offer tuition equal to in-state tuition plus 50 percent. For example, if the in-state annual tuition is $10,000, you pay $15,000.
The WUE has approximately 150 universities in Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, North Dakota, Oregon, South Dakota, Utah, Washington and Wyoming. Visit the WUE Online Database at wiche.edu/wue for tips.
