Monthly Archives: April 2018

Financial Literacy – When is it Effective?

MON, APR 23rd, 2018
For the fourteenth year in a row April has been designated financial literacy month, a time when proclamations are issued, online self-help quizzes and tools are highlighted and we are encouraged to become more literate about our personal financial situations.

Financial security boils down to a few key tenets: Spend less than you earn, build a reserve fund for unexpected contingencies, avoid debt, and save and invest diligently for the future. Pretty simple, right? Why then do we have an ongoing crisis as families nationwide struggle with their finances? Turns out most financial struggles are not all about self-indulgence or an inability to resist temptation. The biggest cause of financial woes is medical debt.

The Burden of Medical Debt

According to the Kaiser Family Foundation 25% of U.S. adults struggle with medical bills—and it’s not just the uninsured. Health care bills are the number one cause of personal bankruptcy filings and such debt impacts 40% of adults nationwide. Per the New York Times, in 2016 20% of Americans under age 65 with health insurance had trouble paying medical bills, of these 63% used most or all of their savings to pay down health care costs and 42% took on an additional job to pay the bills.

Most American households do not have the financial resilience to withstand a health care shock. A GoBankingRates survey indicated 69% of us have less than $1,000 in savings and 34% of us have no savings at all. These households struggle to come up with $500 to fix the car to get to work; never mind the thousands of dollars in bills even a minor health issue can create. And while several studies indicate personal finance high school and college level courses have no discernible impact on behavior there is plenty of room to be optimistic.

Personalized Financial Advice Makes a Difference

Two people were out for their morning walk when they noticed thousands of starfish washed up on the beach. One of them bent down picked one up, and threw it back in the ocean. “Why did you do that?” asked the friend. “You’ll never make a difference.” “I made a difference for that one,” he replied.

Guiding people to successful financial lives is a lot like throwing starfish back in the water. Programs that attempt to broadly create financial literacy and good financial behavior have a mixed record at best. However one-on-one advice—when the advice seeking individual or family is ready to accept it—has a great track record of making a positive difference.

“Just-in-time” learning has a demonstrable positive impact. For example, when a new hire is schooled on the tax advantages and long-term wealth building potential of the company 401(k) as part of the onboarding process she is far more likely to participate in the plan. When a financial advisor works with a young couple to help them create a budget, improve their credit score, and build an emergency reserve in order to achieve their goal of home ownership the couple is receptive to changing behaviors.

Don’t Struggle with Your Finances Alone

While solving the health care challenge, the underemployment of many, and the skills gap between available careers and skill sets of job seekers is way beyond the scope of this missive, we can circle back to the basics of a successful financial life and can continue to look for “just-in-time” opportunities to share these lessons with our loved ones and anyone else willing to listen.

Spend less than you earn, build a reserve fund for unexpected contingencies, avoid debt, and save and invest diligently for the future. For help in doing just this, please reach out to me or any one of Albion Financial Group’s Senior Wealth Advisors at (801) 487-3700.


John Bird, CFA®, CFP®, MBA / President, Principal and Co-Founder
Albion Financial Group
(801) 487-3700

529 Plans: Saving for My Son’s Future

FRI, APR 6th, 2018

April is National Financial Literacy Month and a helpful annual reminder to brush up on your financial education. Gaining a complete understanding of both your personal and family financial picture will always be one’s primary financial assignment. For many of us, our family finances include a saving strategy for higher education expenses for our children or grandchildren. Fortunately, there are many college savings tools available to help parents and grandparents plan for the future.

When my son was born, I opted to open and begin funding a qualified tuition plan also known as a 529 plan. Named after the corresponding section of the Internal Revenue Code, 529 plans are tax-advantaged savings vehicles traditionally sponsored by states and explicitly designed to encourage saving for future education costs.

Five elements of 529 plans that every parent and grandparent should know are below.


529 plans are tax-advantaged accounts

Contributions grow tax-deferred as long as withdrawals are used for qualified education expenses, earnings in the account are not subject to federal income tax, and in most cases, state income tax.  Qualified education expenses include tuition, room and board, books or computers. Some states also offer tax incentives for contributions. Locally, contributions to a Utah 529 plan are eligible for a 5% credit against Utah income tax.

I initially funded my son’s 529 account with $5,000. Assuming I make no other contributions, if his account grows to $9,000 by the time he goes to college; and I use the funds to pay for qualified education expenses; there will not be any taxes owed on the $4,000 of growth that occurred in the account. That’s right… that growth is tax-free!


What if your child or grandchild doesn’t attend a traditional 4-year college or university?

529 accounts can be used for trade or vocational school, community college or graduate school. And as of the 2018 tax year you can withdraw $10,000 per student per year to pay private school tuition for kindergarten through 12th grade.

It is also possible to change the beneficiary to a qualified family member. Qualified family members include the beneficiary’s siblings, parents, cousins, nieces and nephews, aunts and uncles, and even spouses.

If your child receives a scholarship, you can take penalty-free withdrawals up to the amount of the tax-free scholarship. It is important to note, however, that the earnings will still be subject to income tax in this scenario.

If none of these are options, you can take a non-qualified withdrawal and pay income tax plus 10% on the earnings portion of the withdrawal. The principal will never be taxed or penalized.


529 plans are state-sponsored but funds can be used at schools nationwide

I opened a Utah 529 plan (called ‘my529’ in our state) for my son, but that doesn’t mean he has to go to a Utah school.  He can go to most schools in the United States and even some institutions overseas. For instance, if he selects a school in New York, Michigan, California or even at Cambridge in England we can use the funds saved in his 529 plan to help pay for these education expenses.


Investing in 529 plans is straight-forward

There are a variety of investment options within each state’s 529 plan. Many plans have an “age-based” investment option where your asset allocation becomes more conservative as the beneficiary gets closer to the age of college attendance. Additionally, most plans provide the ability for the owner to pick and choose specific investments. One important note – you can only change your investment allocation twice a year or when there is a beneficiary change.

I opened my son’s 529 account when he was born and selected the Age-Based Aggressive Global investment option which allocates the entire account balance between one domestic equity fund and two international equity funds until he reaches age 7. Starting at age 7 the investment mix slowly becomes more conservative.  Given our long-term time horizon (college is still 16 years away) we can accept the near-term volatility of the equity markets in pursuit of long-term growth.


529 plans make great gifting options for friends and family members

Each year on my son’s birthday I remind our gift-giving family and friends that while clothes and toys are nice, a contribution to his 529 plan is the gift that keeps on giving. This statement rings true for young beneficiaries especially. The earlier you start saving for college in a 529 plan the more benefit achieved through compounding growth.


Let Financial Literacy Month be the catalyst for you to establish and fund your college savings plan(s). To learn more about 529 plans and how they fit in the context of your overall financial picture, please reach out to me at 801-487-3700 or


Liz Bernhard, CFP®, MBA / Senior Wealth Advisor

Albion Financial Group

(801) 487-3700