A Three-Part Series to Help Your Child Learn The Ways of Money

Teaching your kids about money – Pre-adolescent thoughts
Gaining responsibility about money – Adolescent thoughts
Paying for college and being an adult – College and beyond
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College and Beyond

Your parenting guidance doesn’t end at 18. It’s as valuable during college and beyond as it’s ever been, just more nuanced. The relationship you’re building will create opportunities for you to share your hard-earned experience, particularly as it pertains to economics. It’s not too likely your child can appreciate how expensive college can be, what it takes to earn enough money to pay for it, nor what it’s worth once it’s gained. How could they? At the best, it takes years to learn self-management and money management. Below is a strategy that worked very well for us in our situation that helped our college bound children pay for college themselves, value and appreciate their education, and learn the value of a dollar along the way.

If your kids are going to go to college and for whatever your financial reasons, you’re going to pay for it, consider some alternatives. If your child isn’t ready to leave home and take on college life, maybe you should entertain a different plan than to take on that huge expense. Community college can satisfy the college basics they cover in the first 2 years at a fraction of the cost. It’ll save you tens and tens of thousands of dollars and, if you follow the strategy below, save your child a gajillion hours of working to pay off their student loans. Many parents want their kids to experience leaving home their freshman year and living dorm life. Ok, but the educational portion of that experience can be acquired for a lot less and you won’t be trading years of your savings or years of their indebtedness.

Who do YOU desire for your child to become at the other end of college life? As a result of this investment in their future the thought is they will come out on the other end better off, more knowledgeable, more mature, better balanced as a person, and ready to take on their role as an adult. How will they face for the first time ever not having a pre-determined ladder to climb, schedule to attend, and new habits to ingrain? If you’re spending $50,000-$200,000+ for college, the person they become is rather relevant.

Our strategy: We believed our children should pay for school. They should come to feel the weight of their decisions even though that weight won’t be understood for years to come. Therefore, they will likely have to take on student loans. Yet, we believed they should pay too. Here’s a plan:  If you’ve been able to save money, whatever the amount – give it to them now. All of it. Set up a Schwab account and transfer the money. It’ll be sobering for them. Then encourage them to take student loans (you’ll have to cosign). At this point they’ll have a balance sheet – assets and liabilities. Encourage them to get a job and pay the interest if they can, forebear payments if they can’t. Here’s what you hope will happen – they’ll naturally hate debt and love assets. Our kids did this, hated the debt payments that hit their monthly cash flow and loved to watch the growth of their portfolio. They worked their butts off to pay off their debts, living a spartan life for several years. At the end, here’s the mic drop, they owned the value of their education. They could begin to appreciate how hard we worked to earn the money. They now live an adult life of no college debt with a reasonable stock portfolio. (The potential downside to this plan is your child could spend all the money you give them and stick you with their student loan debt or bad credit if they miss a payment. Make sure you educate them on how it will hurt you if they’re late on their student loan payments. In fact, this will help them understand credit scores and credit card management!). The payoff – Your child will own the value of their college education because they earned it through sacrifice and hard work. Isn’t that what you want for them as adults?

MarrBank. As you may know, we’re big on Family Identity. Let’s say you couldn’t save enough for their college, or Covid happened and your savings got cut in half. A way in which you can continue to help them and create a reason for them to continue to knit together as siblings is to start a FamilyBank. We funded the “Bank” with a small amount, then as their student loans started repayment, they had jobs and income, we lent them the money to pay off some of their loans. The terms were 3% amortized over 10 years. After a while, the balance of the bank allowed us to lend them some more so they could consolidate their debt into the family bank. In time, all the student loan debt was gone, and they only had MarrBank debt. They paid off tens of thousands of debts and were increasingly financially sound. In fact, the MarrBank financed wedding rings for the boys and helped with a down payment on a house as well.

Your child is likely young now with college a distant dream. By reading these Letters you’re clearly working on forming their mind. Bit by bit you outsource some of that to others. And college is the most expensive outsourcing in both money and culture. These 2 strategies will help you continue to have positive influence as the college sway is left behind and they begin to tackle adult life. Giving them ownership of their education while developing money management skills will give them a huge boost into adulthood.

Last thought: Your children may receive benefit in the next decade from inheritance money. We recommend you talk to your parents about their plans. If your kids might receive a chunk from grandma and grandpa, then suggest it be structured so the money gets paid out as a W-2 match over a 10-year period between 35-40. This will reinforce working and not hurt your child if they haven’t learned self-management yet.

We hope this little money series sparked some conversation for you. Having money placed appropriately in the hierarchy of life’s elements is critical for a happy life. Therefore, your guidance for a fiscally balanced approach will be key to starting strong.

Many blessings,

Lis and Dave

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2023 Fall Classes/Programs

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