How to suggest trading toys for tuition

http://www.savingforcollege.com/articles/20091218-how-to-suggest-trading-toys-for-tuition

Trading toys for tuition is gaining in popularity, according to the College Savings Foundation, but you may still find it difficult to ask relatives and friends to donate to your child's education instead of buying toys and games.

The College Savings Foundation reports 27 percent of parents this year -- up from 22 percent in 2008 -- are willing to ask for contributions to college instead of toys and other material items.

In the foundation's 2009 "The State of College Savings" survey, about 4 percent more parents said they had made such requests, but it can be unnerving to ask friends and family to give gifts for the future.

Kevin McMullen, chairman of the Washington, D.C.-based nonprofit foundation says, "It's important and it's a big investment in the child's future." However, he says, "Sometimes the challenge has been the parents actually asking. Anytime you're talking about money, I think it's a sensitive topic."

James A. Boyle, president of the Arlington, Va.-based College Parents of America, says asking for 529 contributions as a gift is a laudable idea, but he's not sure how realistic it is for parents.

"It can't be a request that comes out of the blue," he says. "For it to work, you really have to set an example yourselves."

Who to ask

Parents need to tread cautiously, says Gordon Bernhardt, CFP, president and founder of McLean, Va.-based Bernhardt Wealth Management.

"Know who you are asking and who you possibly could offend by that request," he says. "That's the danger here."

If you are considering asking those who tend to spoil your children, such as godparents, think about whether they are going to be comfortable with this discussion, Bernhardt says.

With grandparents -- the most common group asked for the contributions -- and close family members, Boyle says the approach could be more direct, depending on how easy it is to talk to with them about finances.

"If you have open and honest conversations in your family about your financial situation and what your priorities are, that's going to encourage a grandparent or a brother or sister who has the wherewithal to make a significant contribution to do so," he says.

Approaching the conversation

The request may seem more credible to friends and family if you have spoken to them consistently -- from news of the pregnancy onward -- about the importance of higher education for your child, Boyle says. You also need to have lived up to that by setting up and contributing to a college savings plan.

If you've done that, "the individual who is making the gift contribution kind of feels that their investment is going to be a worthwhile cause because they know that you've got skin in the game too," he says. "The burden is not on them to suddenly start saving for your child's college, but they see how committed you are."

Bernhardt says parents also could suggest: "We appreciate everything you do for our kids, but our kids have more than enough. Many kids have far less. In lieu of gifts, we would certainly appreciate a contribution to their 529 plans."

When someone asks you what your child wants for the holidays, McMullen says you could explain that you are teaching your children to be responsible with money and to think about the future by saving now for college. Encouraging friends and family to make gifts for college could reinforce what your children are learning.

Another idea it to bring up studies about the increasing cost of college and how that applies to your efforts to save now for your kids' college, McMullen says.

Your friends and family may not think their amount can make a difference, but it can.

"Any little bit of money that can be used to save for this child's college helps," McMullen says. "Even if it's as small as $25 or $50 that will help reduce some of that."

Handling the contribution

Before bringing this up, review contribution limits and gift rules, which could vary from state to state. There are number of options for receiving contributions to 529 plans.

Bernhardt says it's important to remember that when it comes to money, consider whether the family member or friend would like to maintain control of the money. Some people might want to write a check to put funds into an existing 529 account for your child. Others may want to create a new 529 account in your child's name.

Other options that can assist you when you invite people to contribute to accounts include Upromise Investment's "Ugift" feature with step-by-step instructions, including an invitation and gift coupon that plan holders can send to friends and family.

Your financial adviser may have details about a gifting program that makes it easier for friends and family to contribute. Some even have cards and other ways to buffer the blow when a child doesn't receive an actual toy.

"That may be one way of at least showing the child that it's something more than them thinking, 'I didn't get my gift,'" McMullen says.

Posted December 18, 2009