College – so far, and so near. Ignoring the politics of college and the debate surrounding left or right, we’re assuming you want your children to be as prepared for life-after-home as possible. And that might include continuing with a post high school education. Even though that might be far away, you may be already saving for that event just as you are parenting for that event. There’s a reasonable debate as to what’s appropriate on paying for or financing their education. The Marr family is past the life event where all 3 of our kids went out of state and paid the big bucks, graduated admirably, and have learned the life lesson of the value of education and of a dollar. Here’s our story for you to weigh the pros and cons for your upcoming situation.
First point: Rare is the child that understands how much you’ve saved and sacrificed to help them pay for school. They just can’t know how long it takes to save a dollar, or ten, or one hundred thousand. It’s beyond their comprehension. So how can they decide which school to go to and whether it’s worth it or not. No, they just succumb to cultural pressure to go on to higher education, often to the highest name brand they can acquire, regardless of the cost. How is an 18-year old to decide the fate of their next dozen years of student loans payments? Or if they’re blessed with your generosity, how can they appreciate the value of your stored time (savings is the cumulation of hours you’ve put in earning that money)? It’s truly a monumental challenge for them. Don’t get me wrong, higher education is very, very valuable, but who decides and how to pay for it is what is at issue here.
Second point: What is the goal – learning or becoming? Of course, they don’t know what their college experience will be like. They don’t know what they’ll learn or who they’ll become through this journey. And at the end of it all, will they know what they’ve become? Not likely. They’ll be more mature, sure, but will they at that point understand how valuable their education is? Still no. Their education, even the best education, lacks the context of life. That’s why they call their graduation event a commencement ceremony, a beginning. However, was it worth it? Well, to be determined. In our experience, a person can’t appreciate their circumstances until they are called upon to be responsible and own them. The point is to get them to own their education, money and behaviors, as soon as possible. Ergo, our solution.
Our solution: The money we had saved for each we initially put into a 529 account that grows tax free. We ended up taking the money out because those accounts are terribly slow growing and risk averse – plus the restrictions on the accounts didn’t fit our ultimate plan. Our plan had us giving all the investments we set aside for college to each child so that they could manage the investment accounts and pay for school themselves. Once the money ran out, well, that’s it, no more. In addition, we encouraged each child to take out student loans. Of course, we had to co-sign, but the kids knew they were going to be responsible for repayment. This was a risk and a weakness to the plan. They could have spent the cash and saddled us with the student loans. Fortunately, our children took ownership of their finances and education. The theory was each child would come to understand our sacrifice associated with giving them so much money, come to realize they had a boatload of student debt, come to appreciate the value of their education, the understand the value of self-sacrifice and work, and ultimately become responsible stewards of their own finances. The risk was student debt default and the reward was all the savings we had given them. Money was tangible, education was not.
So what happened? Well, we’d say the plan was successful. If we were to change anything, all would agree, we wouldn’t have let the kids pick the school without more forceful input from us. Out of state education in our opinion is a ridiculous decision, unless you’ve got serious scholarship money. The costs for each child exceeded $135,000. Good schools, as far as that goes, but the value just isn’t there. The first 2 years were completely wasted given the total cost and value received. But that’s for each family to work through. The point here is who is your child becoming relative to money.
Even the least costly college education is expensive, unless it’s free, so go for as many scholarships as possible. How then to get your child to appreciate the value? By giving them sovereignty over their monetary life as soon as possible. The sooner they face adult issues like: What happens to them if they run out of money? How do they manage their assets? Should they get a job to pay for daily expenses? What lifestyle makes sense given that their debt burden is growing? Do they really need a frufru coffee drink, or just coffee? Nickels and dimes matter to a person on a very limited budget.
In the end, the kids paid off their student loans fairly quickly and owned their choice of school much more so than if we had just paid for it. And they did become good stewards of their money, which is key because good stewardship doesn’t stop after college. These questions don’t end. Who do you intend for your child to become relative after college?
It may be a long ways away, but believe us, it’ll be here before you know it.
Many Blessings,
Lis and Dave Marr