What is the best way to invest in your child’s education?
A few housekeeping things right off the bat: The below stance has nothing at all to do with the validity of college savings plans themselves; the investments, management fees, etc. The opinions expressed here are based entirely on the idea that your money could be, and should be, better spent. Got it? Good. Here goes:
While they’re not a guarantee, the Mrs. tends to enjoy a pair of handsome bonuses each year. From them we generally budget for a $1000 contribution to each of the girl’s 529 College Savings Plans. That’s a grand sum of $2000 to 529 college savings plans every 12 months. Not last year though, and none for 2012 either. Instead, we used the two grand for 2011 to beef up the 5-year old wooden swing set that calls our backyard home. As investments go, this wasn’t even close.
How does an enhanced kiddie play structure compare against money for higher education you ask? Easy. With the new giant rock wall, fire station pole, and 14″ swoop slide my two girls will spend the next half decade challenging themselves; their bodies, and their minds. With the 2-story ‘treehouse’ skybox, they’ll enjoy even more years of outdoor play with each other and with friends telling stories, pressing leaves, scaring each other, writing bad poetry, doing their version of improv comedy, writing songs, thinking, and dreaming. I wouldn’t be surprised if there is some making out in there in a number of years. Better there then behind the mall dumpster, I say. What they’ll each take away from the countless hours of fun ahead of them will trump the single 3-credit class + books their $1000 would get them if they were going to college RIGHT NOW! Forget about 11 years from now for the Bear or 14 years for the Mouse! That’ll probably cover their parking permits for one semester. And as they say on TV infomercials, “BUT WAIT, THERE’S MORE!”
If you commit to this plan early on in your child’s life she will be, by the time she is college-age, cultured and will have seen, heard, touched, and experienced more than most humans will in their entire life.
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Let me make the case that you shouldn’t save one penny for your kid’s college tuition. Don’t even open a 529 college savings account. Unless you’ve got $10,000 or some eye-popping figure to toss into that bucket every year (and if you do, you can probably also do what I’m about to say), don’t. even. bother. Instead, take all the money you think you want to stash away for college and do some or all of this every single year from now until your children are college age:
- Spend a week traveling with your child; in Europe, road trip across America, rail through Canada. Pick a different spot every year and go explore, learn then speak a new language, taste new foods, assimilate into the culture of the region.
- Buy an old car/boat/house and rehab it together.
- Enroll in cooking classes together.
- Subscribe to a local theater season of plays & musicals & acting classes.
- Try to see every Major League Baseball ballpark, or road trip to a cluster of minor league parks.
- Build them a book nook in a corner of your home.
- Get pampered at a spa together.
- Let your child take piano/guitar/trumpet/singing/dancing/gymnastics lessons. Maybe give that old instrument another try yourself, and learn together.
The key word in all of that: TOGETHER.
If you commit to this plan early on in your child’s life she will be, by the time she is college-age, cultured and will have seen, heard, touched, and experienced more than most humans will in their entire life. Your child will have lived a life that no collection of textbooks could broach. She will be smarter, wiser, more humane, more global, and more interesting than any 22-year old tossing a hat into the air on graduation day, and WAY more so than a random 18-year old still undecided on a major. She will be more self-aware, more observant, more compassionate, and closer to you, her parents. She’ll be thankful, humble, and adventurous. [switching gender pronouns now] He will be ready to take on any challenge in his adult life in a way that a student simply confined to walls, dorms, book learning, and classrooms won’t be / can’t be. And guess what: he can still go to college! He can work for it which will make the experience longer and more challenging, yes, but also more satisfying and ultimately more rewarding. How many fresh-faced 18 year-olds waste that first semester or first year of college trying to figure out what they want to be, how to be, who they are, and how to survive in the real world. Imagine that feeble attempt at instant assimilation and self-discovery and the wasting of 18 years of your saved money.
Maybe this can be read as a case against college itself; I do think it’s terribly overrated for professions outside the highly technical. But there can be a lot of value in education—probably more value when one is educated at 28 as opposed to 18—but value nonetheless. Really, this is a case against the relatively new idea that we must—MUST —stash money away for our children’s higher learning expenses. That we are doing them a disservice if we don’t or cannot. I contend this idea is a bit of a marketing ploy by the financial industry desperately searching for new ways to get inside our wallets. I can make a similar argument against retirement savings, but that’s a topic for another day.
Think about this scenario for a minute:
- you have two children
- you save $1000 per child (not a small amount) every year of their lives until each turns 18.
- you get a 5% return on your investment, on average, every year.
- after 18 years you have roughly $29,500 per child saved for college. That’s not too shabby. Congratulations!
- $29,500 is likely to net each child just ONE (1) year of school, books, & room and board at a public university 18 years from now.*
I’ll argue that what the original $18,000 investment could have given your child over 18 years is more valuable, enjoyable and memory-making than one year of college ever could be. Plus, you won’t ever have to sweat the 529 plan balance bobbing along with an increasingly volatile market. But the real kicker is that your children can have that year of college too, anytime they want. But they’ll never, ever, ever, ever, ever, ever, ever, ever, ever, ever, ever get the precious time with you again. This much is absolutely certain. And priceless.
A child with 18 years of experience in their front pocket is more likely to know themselves and know what they might like to learn more about in an academic setting and maybe know what profession they’d like to pursue. College will then enhance their accumulated life learning and feel more meaningful. Higher learning is more substantial and powerful in its effects when it is earned. I’ve met too many people who’ve spent 100k of their parents money or who are saddled with hefty student loans themselves to get their history/English/philosophy bachelor’s degree only to spend their next decade in a call center cubicle. What the hell was the point? To think of all the experiences they could have had alongside their parents. An opportunity gone forever.
Not for us. We are using what would be their 2012 contributions to a 529 plan on airfare to Barcelona during the Bear’s Spring Break week; a vacation that will take us to three countries (Spain, France, Andorra) over 10 days. That’s $683 to USAir instead of UPromise, the dividends from which will be paid in Euro instead of greenbacks but the long term gains are expected to be much higher.
The above is just a little something to think about, a not often heard counterpoint to the constant din of “save, save, save” new parents hear regarding their child’s future education. I’ve seen commercials that are nothing more than a cleverly disguised parental pissing contest about which couple is saving the most for their new baby. Like we need another thing to compare against each other.
Dismiss this if you wish. It’s totally your call. I’ll be off doing something interesting with my kids if you need me.
*I have no special insight into the future of college costs but it doesn’t take much research to discover what prices were 18 years ago and to quickly calculate what they may be 18 years from now.
This was originally published on Out With The Kids.
Read more on Money on The Good Life: Is a College Education Overrated?
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My daughter just finished her first year at a big Boston university (no, not that one). We’ve been saving for college for about 10 years (and she’s worked summers to contribute) and I think, all things being equal she’ll graduate with no debt. To my way of thinking my daughter with have a huge life advantage over those coming out of school with debt. She’ll be able to breathe. She’ll have room to make her choices, and yes, her mistakes. She’ll have the opportunity to take a more meandering path. Because she doesn’t have to service a 6 figure debt.… Read more »
As a current college student there are things that I can say I agree with here but a lot that I disagree with. Sure that $29,500 is only going to get your child one year of college. Sure you can spend that extra money on something fun for your child. Look at the large picture ramifications though. Most high paying jobs like to see a college degree. Even internships typically want seniors. You may be giving your child the experience of a lifetime but I also believe it should be the child’s decision as well if they want to go… Read more »
I would hope that a happy relationship with one’s kids wasn’t dependent upon the parents paying for their adult children’s education. While most parents want to help as much as possible with costs of higher education, they don’t owe it to their kids to provide one. And if the kids actually scorn their parents for not providing it, then there’s something more deeply wrong in that relationship than can be fixed with a paid-for college degree.
The only thing a 529 account does is make you unable to qualify for grants when the time comes. Instead you’re eligible for high-interest government debt that compounds by the hour and is dispersed to a dizzying disarray of loan handlers, each with its own convoluted way of handling things. The students whose parents are buried in consumer debt get a free ride, while I have to pay thru the nose for everything out of my single-income salary to the tune of ~$15K/year. I would NEVER suggest saving, saving, saving to ANY parent.
I can see both the author’s point of view as well as some of his critics in the comment section. First let me say I teach at a community college, after graduating from (and teaching at) a traditional 4-year state university. So my first point is this: I agree that a college education isn’t for everyone. Doing well in a formal, academic environment – even one as low-key as a comm coll – requires certain skills that not everyone possesses. That’s not to say that they can’t be taught (and should be, but usually aren’t). But not everyone is cut… Read more »
I should have said “just paying for THEIR living expenses…” Sorry!
This comes on the heels of a NYT article discussing how even file clerks and receptionists need to have a BA now (are those the “highly technical” fields he describes?). The other interesting and enriching experience I foresee for this author: trying to get his adult kids to move out of the basement…
Anyone who thinks that it is remotely possible for a kid to work his or her way through college is living somewhere back in 1979.
Look at the average part-time wage for a 18-22 year old. Look at the pitifully low number student loans max out at. Then I want you to look at the average tuition cost, adding in the cost of books and room and board. Now, tell me how on god’s green earth that’s supposed to work out.
How out of touch can you be?
According to a CNN Money article from Oct 2011, community colleges, on average, cost $3000 a year to attend. I am pretty sure an 18-22 year old working part time plus getting a tiny bit of help from parents if needed can manage that. So a child can spend their first two years there before matriculating into a public state university. The article goes on to say that: “Fewer than half of all public university students pay the full sticker price to attend. Federal surveys show at least 52% of all students at public four-year universities receive scholarships or grants.… Read more »
I don’t know…I think you can have fun doing things with your kids and still save for college. I mean, instead of buying a huge swing set/play structure, I’d rather walk to the park and put the money towards the 529 plan!
I totally believe in giving my kids the opportunity to attend college. I don’t want them to be overwhelmed with having a full time job at the same time, because I think they will have to do a minimal job in their classes and won’t get as much out of them. Still, I agree with the main point of this article. Using my financial resources to enrich their earlier years through shared experiences is even more important. I also agree that we do not have to give up one, to do the other. As a single parent, I was unable… Read more »
I always thought it was funny that we get so pressured to save for college for our kids, but no one urges young people to save money to put their kids in daycare for four years before they go to kindergarten. If you’re a family that has to rely on daycare while you both work it can cost $10,000 or more a year to pay for it – do we save up for that? I agree with the author. At this point who knows what college will cost for today’s young kids or what skills they’ll need. Maybe it’s best… Read more »
Ita! I dont think its a good idea for parents to save for college. College is seeming less and less like a good bargain anyway. I would rather put the money towards learning a skill or starting a business. Id rather my kids have business experience than going to college. I would tell my kids to work through college. If they cant afford it they dont need to go. Id be willing to help out though. Too many people are taking out the equivalent of a mortgage in students. Many youngsters dont understand what it takes to pay back $25k+interest.… Read more »
My kids will be attending a private academy for high school. The institution has always been intensely academic in student-future-focus. It was alway a well rounded 4-year curriculum that produced many grads heading for Ivy-League on-down. I’ve had some experience with the school and have always found it to be a very serious and disciplined environment for both faculty and students. This wonderful academy is also realistic and nimble in change management. So, in being honest with themselves and the students, they have recognized the employment economy for all of their output. Thus, they have incorporated Career Education options…and “options”… Read more »
Here here! Totally agree with this article. IF THE KID REALLY WANTS IT – THEY WILL FIND A WAY AND HAVE MUCH MORE RESPECT FOR EARNING THE DEGREE. I have seen countless kids (and yes they are kids!) BLOW through their parents’ hard earned, tucked away money in college by either skipping classes, changing majors or dropping out without their parents knowledge. I have seen friends’ sacrifice their own retirement future, and home equity to pay for these college expenses – CRAZY! Suzy Orman says it best — you can borrow for college but you can’t borrow for retirement. I… Read more »
Besides my usual plug for community colleges, I’d also add another consideration related to paying for college: Don’t assume that 18 is the best age for your child to start college. It’s better all around for a student to be in college because he/she has decided to go to college or has consciously chosen college among other possibilities in life. I’ve come across many students who were in college largely because they were “college age,” which means they thought that because they were 18/19 they were SUPPOSED to be in college, but that’s a really poor reason to be in… Read more »
If adults (real adults) have their life properly structured, cash-flowing college for you kids ought never be un-doable. But if you’ve adhered to social bull like the latest and greatest toys with the Jones’, the Lexus SUV and the BMW 525 every two years….if you treated your home like an ATM and put your priorities on YOU, then you ought to be able to come up with whatever you need, when you need it, AS you need it.
Dual income home dwellers are flat-floor stupid if they require both incomes. THEN you have no options or wiggle room.
While I do appreciate the idea of doing things with your children that broaden their horizons and give them more life experiences I don’ t see this as an either/or situation. Rather to me it is better served to strive for both. Besides the more a parent interacts positively with their children in their younger years tue better the child’s self-esteem will be later. High self-esteem has its own rewards which only goes to.build upon previous successes. If a child is more confident then they are more lilely to perform better in school. Better school perfoemance leads to better grades,… Read more »
This is a great article. It’s encouraging to me because I second guess everything I do as a parent. I love being a stay at home mom but that also means one income at this time. Sometimes, I wonder if I should work part time to give our son MORE stuff. I know that stuff is just stuff. But I am guilty of getting caught up in that cycle of thinking he is suppose to have EVERY toy. Quality time is definitely more important. We have a great time together and I look forward to homeschooling with him. All the… Read more »
You had me interested untill you said “similar argument against retirement savings” makes me think of someone who thinks only of the now. I can see the argument against saveing for college if your kids are losing out because of it. If you have a bit of money to spare without the children suffering, then yes, save, but too many people do miss out on hoidays and toys for the kids and the like on the hope of something for the kids college. However as soon as you argue against retirement savings it jumps to “Spend now, worry later” which… Read more »
Interesting not often heard perspective on NOT saving for college…I think many people blindly start a savings account for college without realizing they are making poor choices on financial trade offs RIGHT NOW. I have often believed saving for college should be #3 or #4 on anyone’s financial list behind 1) paying off your mortgage (if your mortgage will be paid off by the time your kids start college then fine, start saving for college) 2) saving for retirement – establish a plan to build retirement savings, if you’re on track with that plan only then begin saving for college.… Read more »
The author clearly said he’d have his kids pay for college by working – didn’t mention anything about loans. I worked through college and my parents helped me. I graduated debt free. Most of what I REALLY needed to know I did get outside of formal education not the least of which was a humble work ethic. But admittedly, the piece if paper HAS helped me get past some pretty stupid rules in the working world as well. I thought this was a great post. A gutsy suggestion in a world of sheeple all chasing the same false promise. The… Read more »
Don’t go unless you know what you want to do. Waste otherwise. ^Went to college.
I have another amazing idea. Don’t have kids! I always complain about my fiance and I’s ridiculous rent or our high food/dining-out bills in Manhattan. Also, we spent about $15k in plane tickets last year. We don’t make a ton of money, but I always compare myself to my friends with kids and think…..”well, we don’t have kids….or bills…or responsibilities….this is AWESOME!”
The main reason for going to school is. to make more money., you wont be any smarter that someone who learns outside of school but you’ll make more money just because you have a degree. Remember the CEO that yahoo fired just because he didn’t have a degree.. not because could not not do the job.. just because he didn’t have a some paper. It does not matter if your degree is in underwater basket weaving.. company’s just want to see a degree and they will pay you more for having one. Yes, it’s a scam. but so is most… Read more »
This is a totally fallacious argument. It argues that it’s EITHER A (saving for college) or B (giving your child significant experiences). How about giving your child significant experiences by saving money in other ways? How about B instead of C or D or E? Like the $500 *per person* in your family that you spent on that iPhone last year? Or the $1200/year that you spend on your cable TV bill? Or the $1500/year that you spend on a gardener when you could mow your lawn yourself? Or the thousands you spend on other things? I’m pretty sure you… Read more »
Terrible advice…somewhat. Why not do those things “together” AND save for college? It’s doable. No matter what someone’s income is — because we don’t know what the author makes. If you save almost $30,000 for an 18-year-old, that’s THAT much they won’t have to pay back in loans. I would love to have $30,000 less to pay back in student loan debt! That could be “X” years knocked off me living in the red. The good thing about a 529 too, ANYONE can pay into it. So, while the parents may be saving money for college, friends, family, etc. can… Read more »
While I agree with many points of this article, what is left out is the benefit of saving money for future experiences with older children. My brother and I are 27 and 33, with a PhD and MA between us. We have spent lots of great time with our folks since graduating, thanks in part to their ability to help us financially with college AND otherwise. As a working student at a public university, it would have been hard to see them if they didn’t help with travel costs, for instance. Also, when medical scares came up that couldn’t be… Read more »