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Message
A Fundamental Question: To Support Your Child's Post-Secondary Education or Not?
Posted on 6/27/13 at 7:41 am
Posted on 6/27/13 at 7:41 am
Assumptions...
3-4 children
1-2 years age seperation between them
Oldest is currently 2 months
Current age of parents 25, 31
Age when first child enters college 43, 49
Do you ...
Option 1. Begin saving for your child in a 529 or other similar investment vehicle so when the time comes you can help offset the costs of rising post-secondary education.
Option 2. Use the money you would have put in option 1 and place in either a retirement vehicle or other investment solution and when the time comes to help offset costs such as cost of living for your children during college.
Pros...
Option 1. If your child gets a scholarship or does not get a scholarship either way out of High School you can financially support their education. Thus placing your child in an extremely advantageous position once graduated with zero debt.
Option 2. Places my wife and I in a more comfortable position for retirement/non-discretionary spending, while instilling work ethic and a sense of accomplishment in our children by forcing them to pave their own path either through scholarships, grants, jobs, etc.
Cons...
Option 1. Takes away from our retirement funding and non-discretionary funds. May instill a sense of entitlement or ungratefulness in children.
Option 2. Straddles your children with debt right at the onset of their adult lives.
What is the money boards opinion?
3-4 children
1-2 years age seperation between them
Oldest is currently 2 months
Current age of parents 25, 31
Age when first child enters college 43, 49
Do you ...
Option 1. Begin saving for your child in a 529 or other similar investment vehicle so when the time comes you can help offset the costs of rising post-secondary education.
Option 2. Use the money you would have put in option 1 and place in either a retirement vehicle or other investment solution and when the time comes to help offset costs such as cost of living for your children during college.
Pros...
Option 1. If your child gets a scholarship or does not get a scholarship either way out of High School you can financially support their education. Thus placing your child in an extremely advantageous position once graduated with zero debt.
Option 2. Places my wife and I in a more comfortable position for retirement/non-discretionary spending, while instilling work ethic and a sense of accomplishment in our children by forcing them to pave their own path either through scholarships, grants, jobs, etc.
Cons...
Option 1. Takes away from our retirement funding and non-discretionary funds. May instill a sense of entitlement or ungratefulness in children.
Option 2. Straddles your children with debt right at the onset of their adult lives.
What is the money boards opinion?
This post was edited on 6/27/13 at 7:43 am
15
Posted on 6/27/13 at 7:48 am to ClownQuestionBro
i have three kids, but mine are spread farther apart, by several years(15 between the oldest and youngest)
we have 529s for all three. plus my parents also have some sort of education fund for our three.
wifey and i made a committment to save for their education, while still saving for our retirement. we are able to do both, nicely.
we have 529s for all three. plus my parents also have some sort of education fund for our three.
wifey and i made a committment to save for their education, while still saving for our retirement. we are able to do both, nicely.
Posted on 6/27/13 at 7:56 am to ClownQuestionBro
I am not currently in a serious relationship with anyone (or rather, its one of those annoying as hell, BBC, "it's complicated" scenarios) but I'm putting money aside for the potential kids down the line.
I am putting money in a taxable account in the form of a couple of different classes of ETFs that share one commonality: they pay good dividends.
The goal is that by the time kids, of any, come in the picture they will have the ability to at least heavily subsidize expenses.
If not, there are other avenues for me to use an alternate, tax advantaged revenue stream that has no restrictions to use as I please.
I am putting money in a taxable account in the form of a couple of different classes of ETFs that share one commonality: they pay good dividends.
The goal is that by the time kids, of any, come in the picture they will have the ability to at least heavily subsidize expenses.
If not, there are other avenues for me to use an alternate, tax advantaged revenue stream that has no restrictions to use as I please.
This post was edited on 6/27/13 at 7:57 am
Posted on 6/27/13 at 8:02 am to ClownQuestionBro
One of my MBA classmates is a pretty succesful financial advisor and I asked him the same question a year ago. In short, heres what he says...
He sees hundreds of people each year that sacrifice their own retirement/golden years by financing their childrens education. He explicitly says "NO" to paying for college unless the monies you spend would be considered disposable income and that you can live comfortably for 20-22 years off the money you've saved for your own retirement. He also believes there is a moral hazard associated with paying for college. In his mind it sends the message that there are "free rides in life" and that his observation has been that children that pay their own way tend to take their education more seriously.
As it worked out, I felt largely the same way and I havent financed my childrens education. If between now and then I have a winfall I'll consider it, but I did it on my own and expect they will too...
He sees hundreds of people each year that sacrifice their own retirement/golden years by financing their childrens education. He explicitly says "NO" to paying for college unless the monies you spend would be considered disposable income and that you can live comfortably for 20-22 years off the money you've saved for your own retirement. He also believes there is a moral hazard associated with paying for college. In his mind it sends the message that there are "free rides in life" and that his observation has been that children that pay their own way tend to take their education more seriously.
As it worked out, I felt largely the same way and I havent financed my childrens education. If between now and then I have a winfall I'll consider it, but I did it on my own and expect they will too...
This post was edited on 6/27/13 at 8:04 am
Posted on 6/27/13 at 8:12 am to wiltznucs
I'm thinking the same thing. I pay some if they do well at the time they attend.
I was all good with the idea until I read it hurts their ability to get loans for school. That part scares me.
I was all good with the idea until I read it hurts their ability to get loans for school. That part scares me.
Posted on 6/27/13 at 8:15 am to wiltznucs
We've talked about paying up to whatever the then-current tuition for public universities is. Anything beyond that is, imo, a luxury. They can go to Swarthmore if they want but they will have to have skin in the game.
I'm bookmarking this thread so in two decades I can come back & laugh at my naivite.
I'm bookmarking this thread so in two decades I can come back & laugh at my naivite.
Posted on 6/27/13 at 8:22 am to Cold Cous Cous
I want better than I had and I didn't have a dime. So, I think if I could give 30k or so, that would be great imo.
I know it will be 70k short for in state at Arkansas, but I'm hoping the college bubble bursts and prices don't shoot up the average 9%.
I know it will be 70k short for in state at Arkansas, but I'm hoping the college bubble bursts and prices don't shoot up the average 9%.
Posted on 6/27/13 at 9:30 am to ClownQuestionBro
1) make sure you can afford your lifestyle
2) save for retirement (if you cant, rethink step 1)
3) save for kids college, with what is left over (if you cant, rethink step 1)
2) save for retirement (if you cant, rethink step 1)
3) save for kids college, with what is left over (if you cant, rethink step 1)
Posted on 6/27/13 at 9:31 am to wegotdatwood
We save for both retirement and future college costs (1 child). Retirement is first on the priority list though.
At current savings rate, my son will have to do his part to pay for college, either with scholarships, or part time job / choosing a cheaper school, etc.
At current savings rate, my son will have to do his part to pay for college, either with scholarships, or part time job / choosing a cheaper school, etc.
Posted on 6/27/13 at 10:27 am to Chris4x4gill2
If you can't do both, forget the savings for your kids. They can get a loan for school, you can't get a loan for your retirement.
Posted on 6/27/13 at 10:52 am to Chris4x4gill2
How much do you set back for your son?
Posted on 6/27/13 at 11:01 am to ClownQuestionBro
quote:
3-4 children 1-2 years age seperation between them Oldest is currently 2 months
I don't understand the math.
The oldest of the 4 kids is 2 months old?
Posted on 6/27/13 at 11:06 am to wegotdatwood
Right now $100/month.
Posted on 6/27/13 at 11:11 am to Zach
I read it as he has a 2 month old, plans to have 3 more spaced out.
I will also say the planning for children and the reality of having children do not always coincide.
You might have them closer together than you plan.
I will also say the planning for children and the reality of having children do not always coincide.
You might have them closer together than you plan.
Posted on 6/27/13 at 11:11 am to ClownQuestionBro
This is a great question, and one of interest to me as well.
However, what do you consider "saving for retirement"? Is this maxing all available tax advantaged benefits (pre tax 401k and Roth as available)? Or simply contributing?
I contribute to a 401k up to employer match (combined ~$15k/yr), and max my Roth. My wife and I both also have a vested pension in addition to this.
I went through school for free on scholarships + money, and parents payed for required expenses such as gas, car, insurance (lived at home). My wife had TOPS, but had to take out loans. We both worked throughout college. I'd like our kids to do similar, scholarships, but still work through school, and start with only minimal debt.
I'm considering a 529 for the tax benefits, but I'd also like to contribute to my kids starting their lives. Ideally I'd like a similar tax shelter, without the requirement that it be used for school-related expenses. That way I can give it to them for home down payment, weddings, etc.
However, what do you consider "saving for retirement"? Is this maxing all available tax advantaged benefits (pre tax 401k and Roth as available)? Or simply contributing?
I contribute to a 401k up to employer match (combined ~$15k/yr), and max my Roth. My wife and I both also have a vested pension in addition to this.
I went through school for free on scholarships + money, and parents payed for required expenses such as gas, car, insurance (lived at home). My wife had TOPS, but had to take out loans. We both worked throughout college. I'd like our kids to do similar, scholarships, but still work through school, and start with only minimal debt.
I'm considering a 529 for the tax benefits, but I'd also like to contribute to my kids starting their lives. Ideally I'd like a similar tax shelter, without the requirement that it be used for school-related expenses. That way I can give it to them for home down payment, weddings, etc.
Posted on 6/27/13 at 11:15 am to ClownQuestionBro
quote:
If your child gets a scholarship or does not get a scholarship either way out of High School you can financially support their education
LINK
This question comes up a lot,and the worst case situation is always if the children will get a scholarship or not. Everyone including myself wants to believe their children will be successful in school, but maybe we need to be more realistic. Government statistics show 58% of entering freshman drop out of college, how much would you invest in a business if the chance for failure was 58%?
Posted on 6/27/13 at 11:37 am to EA6B
quote:
Government statistics show 58% of entering freshman drop out of college, how much would you invest in a business if the chance for failure was 58%?
Saying that 58% of freshmen drop out is not the same as saying that any particular freshman has a 58% chance of dropping out. (Also the 58% figure doesn't take into account transfers who graduate at other schools, but that's probably only 1-2% of the population).
Posted on 6/27/13 at 12:15 pm to Cold Cous Cous
I put my two thru private school, then one, 4 years at LSU, the second 8 years at LSU. We did without a lot in between me and the wife the first 8 years together saving for them.
Oh, 3 years apart.
Oh, 3 years apart.
This post was edited on 6/27/13 at 12:16 pm
Posted on 6/27/13 at 12:39 pm to ClownQuestionBro
How successful do you want your children to be? My parents didn't pay for my law school and now, at 28, I pay about $1300/month to Sallie Mae for my loans. I can afford it but it is an anchor. One of my dream jobs was to prosecute, but to do that you basically have to volunteer for months before you get put on payroll. I couldn't do that. Nor have I been free to take advantage of other unpaid legal opportunities. If I ever quit a job I better have the next one lined up. All of these contribute to an inability to choose a path that would be better in the long run.
And that's with a law degree. I can't imagine having a large student loan payment with "only" a liberal arts degree. There was a horrible NYT piece about a girl who was $250k in the hole with a history degree from some second tier New England school. I would just die.
I will pay for my children if I am able. Either Ivy League or SEC - paying for anything between (like $50k/year for Tulane) is a bad investment.
And that's with a law degree. I can't imagine having a large student loan payment with "only" a liberal arts degree. There was a horrible NYT piece about a girl who was $250k in the hole with a history degree from some second tier New England school. I would just die.
I will pay for my children if I am able. Either Ivy League or SEC - paying for anything between (like $50k/year for Tulane) is a bad investment.
This post was edited on 6/27/13 at 12:41 pm
Posted on 6/27/13 at 12:47 pm to ClownQuestionBro
quote:
1) make sure you can afford your lifestyle
2) save for retirement (if you cant, rethink step 1)
3) save for kids college, with what is left over (if you cant, rethink step 1)
I agree with this. I also, agree with the mindset that a lot of kids will blow college off if they think it is free. I had to pay for all of my out of state tuition and graduated in 3 1/2 years. I would say 90% of my friends that had tops either goofed off and turned it into 6 years or just failed out. For my kids, I was thinking of the idea that they take out their own loans and as long as they graduate, I will pay it off for them. If they don't, tough luck.
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