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Financial Planning for Back-to-School Success: A Guide for Every Stage

As a financial planning firm, we understand that education is an investment in the future, and like all investments, it requires careful planning and management. From elementary school to college, back-to-school season is an opportunity to review and apply financial strategies that can make a difference for your family. Here's a comprehensive guide to help you navigate this exciting time of year:

Elementary School: Cultivate Savings Habits

• Tip: Introduce a savings jar for school supplies and teach your children to contribute.

• Resource: Use apps like PiggyBot to make saving fun and interactive.

Middle School: Budgeting and Planning

• Tip: Engage your children in budgeting activities. Set a shopping budget and help them make decisions.

• Resource: Budget Simple is a great tool to manage family finances and teach budgeting skills.

High School: Invest in Your Child's Future

• Tip: Consider opening a custodial account to invest in your child's future needs, like college or a car.

• Resource: Websites like Investopedia provide comprehensive guides to investing for minors.

College: Explore Financial Aids and Strategies

• Tip: Research financial aid, scholarships, and student loans. Consider a 529 plan.

• Resource: The College Board offers essential resources for financial aid and scholarship searches.

Be Intentional this Year:

• Gift Stocks this year: Consider gifting stocks to your child. It's an educational way to teach them about investing, and it can grow over time.

• Community Involvement: Encourage your high schooler to volunteer for community service, which can lead to local scholarship opportunities.

• Rent Instead of Buy: For college students, renting textbooks and furniture can save significant money. Companies like CORT, and Feather have trendy, stylish pieces for rent at a reasonable cost for students.

• Employee Tuition Assistance: Explore if your employer offers tuition assistance for dependents, as it can reduce college costs.

We believe that education is more than academics; it's an opportunity to instill financial literacy and wise financial habits. These strategies cater to every stage of your child's educational journey and reflect our commitment to helping families achieve financial success.

Feel free to reach out to our financial experts for personalized guidance tailored to your family's needs. Here's to a successful and financially sound back-to-school season!

Note: This is crafted to provide general guidance. For specific financial advice tailored to your family's unique situation, please consult with a professional financial advisor at our firm.

What we’re watching in crypto:

Cryptoasset ETFs

It’s time to talk about the elephant in the room. A topic that we’ve been vocal about at 401 Financial, Bitcoin and Ethereum ETFs. Late last week, a news report came out from Bloomberg that the U.S. Securities and Exchange Commission (SEC) is planning to give the go-ahead for Ether futures ETFs. Per Bloomberg, “Nearly a dozen companies, including Volatility Shares, Bitwise, Roundhill and ProShares, have filed to launch the ETFs.” To go along with the Ether futures applications, Bitwise and a few other companies have also applied to launch Bitcoin & Ether strategies that would also be futures based.

Let’s start with the basics before diving in deeper on the pros and cons of cryptoasset futures based and spot ETFs. At a high level, a futures ETF is an exchange-traded fund available through a brokerage (like Fidelity or Schwab) that allows investors to speculate on the price movements of an asset without actually owning the underlying asset. These ETFs invest in futures contracts, which are an agreement in which one will buy or sell Bitcoin or Ether at a specified price on a pre-determined date.

A Bitcoin or ETH spot ETF, while similar in that an investor can purchase it through a brokerage account, has some key differences. First, spot based ETFs require the fund to hold the actual underlying asset. For example, if a BTC spot ETF were approved and $1 billion of assets flowed into the fund, the asset manager would need to purchase and custody $1 billion of BTC. It’s worth noting that BTC and ETH spot ETFs are not currently available to investors in the U.S. There has been numerous attempts by companies to launch spot BTC ETFs, however the SEC has struck all of these down so far. Just last week, the first Bitcoin spot ETF went live in Europe. So let’s get to it, here’s our list of pros and cons of cryptoasset ETFs.

Pros

1. Asset Flows - It’s no secret that institutional asset managers are still having a hard time allocating to Bitcoin and Ether within their portfolios. A futures ETF gives them the opportunity to do so in a speculative way, while a spot ETF would give them the opportunity to “own” cryptoassets through their existing systems. An ETF could attract new asset flows by large money managers and retail alike. Spot ETFs could increase liquidity to the market as well. Below is an example of what happened when the Gold ETF launched and the possible impact it had on asset flows to Gold as an asset class (via YCharts). Gold’s price is up over 330% since GLD’s launch, after being flat for two decades prior.

1. Financial Advisor Integration - When adding an asset to a client’s portfolio, financial advisors expect to have the ability to showcase how that asset integrates with the rest of the portfolio. In today’s environment, this process is generally manual and difficult. Access to fundamentals and risk data on cryptoassets remains challenging (stay tuned for a few things the 401 Financial team is working on here). An ETF bypasses many of these challenges because it’s under a similar umbrella as other stock or bond ETFs.

2. Alternative Access Point - A spot based ETF could serve as an alternative way to gain exposure to BTC or ETH without the need to manage a wallet or new exchange account. Additionally, some investors would prefer to own cryptoassets in a retirement account such as a Roth IRA. ETFs could give them an easier access point to do so.

Cons

1. Cryptoasset Utility - Bitcoin and Ethereum are not only asset classes, but alternative financial systems with utility behind them. Holding a BTC or ETH ETF doesn’t give the investor true access to utilize these assets as intended. Bitcoin is a global value transfer network, allowing anyone with a self-custodial wallet on its blockchain to send value digitally across the world 24/7, 365. By wrapping Bitcoin into an ETF, the rules behind ETFs come with it which can negate it’s best use cases. In regards to Ethereum, ETH itself is highly valuable as a utility asset. It can be used by anyone with a self-custodial wallet to interact with permissionless and transparent applications built on the Ethereum blockchain. ETH can also be staked to secure the Ethereum network, giving stakers the ability to earn a return. In short, none of this is possible for the investor by simply owning BTC or ETH through an ETF.

2. High Costs - Not only do investors not “own” the underlying asset when buying cryptoassets through an ETF, they’re paying high annual fees to do so. Could there be fee compression over time? Likely. However, this isn’t the case today. When holding cryptoassets at Coinbase or in a self-custodial wallet, no such annual fee exists. Large asset managers will reap the benefit of the fees at the expense of the investor. Here’s a look at what investors have to pay for expense ratios on BTC futures ETFs that exists today:

1. Investor Confusion & Alternatives - With ETH futures ETFs likely launching in the weeks ahead, many investors will likely purchase these ETFs thinking that they now own Ether the asset. As explained above, this is not the case. Additionally, alternatives do exists that in our view are in better interests of clients/investors. Advising a client on opening a self-custodial wallet and allocating to BTC or ETH may not be in the best interests of an advisor who charges an asset-under-management fee, but its hard to make the case that this route is not in the best interests of the client.

2. Counterparty Risk - The Bitcoin and Ethereum blockchains operate outside of the traditional financial system. In the event a credit event unfolds and an ETF provider is impacted, the Bitcoin or Ether held through an ETF would fall under the same rules as other traditional assets at that provider. The saying by cryptoasset natives is “not your keys, not your coins” could apply here. By owning these assets onchain through a self-custodial wallet, these risks are mitigated.

We understand there are pros to cryptoasset ETFs and we continue to monitor the developments in this area. With that said, our stance at 401 Financial remains the same: We believe owning cryptoassets via self-custodial wallets is best for investors/clients. Crypto is much more than just an asset class.

We’re excited to be on the frontier tackling the challenges that financial advisors and clients face when owning and utilizing cryptoassets. From fundamental analysis, to risk scoring, to self-custodial solutions. We’re building behind the scenes. 

401 Financial Cohort

Tune into Crypto Office Hours on Financial Advisor TV