Author Topic: How to spend the college 'stache  (Read 9693 times)

cygnus

  • 5 O'Clock Shadow
  • *
  • Posts: 12
How to spend the college 'stache
« on: July 27, 2014, 05:02:34 AM »
I have done a pretty good job with the frugality and savings goals and reached FI almost a decade ago although I am still working because I enjoy it and the money is too good to say no to.  We have 2 children in high school and we have saved $250,000 for each of them for college ($100k in 529 plan and $150k in a taxable account).

My question is what is the best way to motivate our kids to choose a college wisely and appreciate the expense.  We have always told them that they would need to contribute for part of their college costs (I saw too many kids in college not care when they had no skin in the game and "wasted" 4 years and lots of $$$$). 

We were originally thinking that they would pay 25%.  They are both high honors students and will most likely get into some top schools.  The apple hasn't fallen too far from the tree and they are frugal too.  We would hate for them to make the college decision based solely on the cost (which is what I did) and potentially turn down an Ivy League school in favor of a lower cost school and miss the opportunity because they didn't want to spend the money.  But then again it would be hard to see them at at $60k/yr school when they could have chosen an equally good school for much less.  So what is the best way to motivate them to choose based on both costs and the value of the education?

Some thoughts: do we tell them they have $250k for "education" and they can decide 1. go to a top school and have it paid for 100%, 2. go to a good but lower cost state school and they can keep the difference after graduating, 3. go learn a trade and with the remainder of the $250k start your own business.

Or do we just stick with the original plan and have them choose the best school for them and they contribute part of the expense through work and their savings?

little_owl

  • Stubble
  • **
  • Posts: 158
  • Location: DC Metro
Re: How to spend the college 'stache
« Reply #1 on: July 27, 2014, 05:28:48 AM »
If I were you, a few thoughts:
Many high schoolers simply don't think beyond college.  I was lucky, in that my dad built me a budget for what my expected living costs would be if I got my dream job once I left college.  I was shocked to see how the "high" salary was eaten away at so quickly.  Go through a similar exercise so your kids fullyappreciate what life costs.  Some surprises for me were rental insurance, the difference in taxes (I had worked and gotten paychecks since 13, but my dream scenario involved high tax cities like DC and NYC.)

Then, I would ensure they understand the dangers of student loans.  How student loans work, how many can't ever be discharged in bankruptcy, etc.

Finally, I would have them work on a project where they compare the total cost (tuition, room and board, incidentals like food and books) of their top schools.

Only after that would I present an option to them.  My recommended option would be that they have to pay 10-20%, regardless of what they select.  You can alwyas "forgive" that later.

shitzmagee

  • 5 O'Clock Shadow
  • *
  • Posts: 54
Re: How to spend the college 'stache
« Reply #2 on: July 27, 2014, 06:08:44 AM »
I would only tell them about the 529 money and make them figure out a way to cover the rest. Based on how you describe them they will seek and find scholarships at a quality school (with cost only be one factor). Then as a surprise graduation present, give them half of what you set aside for in taxable investments. Tell them they can use that money to pay off student loans, as a down payment on a house, a wedding...whatever they think is best. Hold onto the other $75K each and use that to fund 529s for your grandchildren and at least one nice vacation for you and your spouse to celebrate how awesome life has been.

Gray Matter

  • Magnum Stache
  • ******
  • Posts: 3622
  • Location: Midwest
Re: How to spend the college 'stache
« Reply #3 on: July 27, 2014, 06:29:24 AM »
I don't have great advice here (I come from a long line of state school graduate and have a bias that is much more about "good enough" and "fit" than "status" when it comes to schools and admit that this is a potentially-limiting attitude). 

I would probably to pay 75% and let them choose the school.  That way, if they choose a more expensive school and you have to pay more, they have more skin in the game, too.  This also gives them the most flexibility and freedom to explore trade-offs and decide what is most important to them.  They will have to weigh all kinds of things:  cost, ability to get scholarships, how hard their willing to work to get them, how much they want to work while in college, status of institution, living and travel expenses, likely salary upon graduation and ability to pay back loans if they go that route, etc.  These are all important things to grapple with.

I would not tell them about the extra money and would decide down the road what to do with it, depending on how they were living their lives.  If they seemed responsible and decent about savings and expected to earn things for themselves, I might gift them the downpayment for a house at some point, or fund their kids' 529 plans, or I might not.

If I had children with wildly different abilities (e.g., one could easily get scholarships and one couldn't, or one wasn't interested in a four-year college but rather a trade or some solid entrepreneurial venture), I would adapt my approach.

And what I really wanted to say is how very awesome it is that you have this dilemma.  You've done an AMAZING job of saving for your and their futures, and I hope you take plenty of time to feel proud of yourself!

SU

  • 5 O'Clock Shadow
  • *
  • Posts: 90
Re: How to spend the college 'stache
« Reply #4 on: July 27, 2014, 06:45:05 AM »
I think your original plan sounds good, and I'm glad you asked the question because this is something I've been thinking about.

I've seen kids whose parents place a high value on education unintentionally lead their kids to over-invest in education. For example, a friend whose daughter is a composer, and whose grandmother pays half of her education costs and her father pays the other half. She's already done a 4-year degree in another country (covered by parents and grandparents). Now that she's graduated and not getting a lot of work, she's enrolled in another course in her home country 'to make contacts' - again, paid for by parents and grandparents. Note that this isn't a country with a huge market for music and she has a European passport.

To me, it looks like the money being spent on this course 'to make contacts' might be better spent paying rent on a flat in Berlin (for example) where there's a bigger market for this type of work. But because the money for education is 'unlimited' and she's probably uncomfortable asking for help with living costs, they've ended up in this situation of what looks to me like too much study and not enough action.

So... I say pay part of the costs of the education and use any surplus for things like living costs while your kids do unpaid internships or other activities that expand their experience and their networks, or housing assistance in their first years out (for example, so that they can live in a three person share house rather than a 10 person sharehouse until their salary grows a bit, if you think a less stressful living situation would help them to establish their career), or help if they need to move across country for a job. Stuff like that that supports them to increase their earning capacity but is always in the direction of growing their independence.

YoungInvestor

  • Bristles
  • ***
  • Posts: 396
Re: How to spend the college 'stache
« Reply #5 on: July 27, 2014, 06:59:36 AM »
So... I say pay part of the costs of the education and use any surplus for things like living costs while your kids do unpaid internships or other activities that expand their experience and their networks

It's highly unlikely that they will go through unpaid internships if the father is making a good living and says they are honor roll students. Most fields in which the expected earnings are pretty good have (fairly well) paid internships during college.

Mrs. Frugalwoods

  • Bristles
  • ***
  • Posts: 354
  • Location: Vermont
Re: How to spend the college 'stache
« Reply #6 on: July 27, 2014, 07:41:32 AM »
I like the option of you telling them the total amount you'll contribute at the outset and then letting them make their decision with that knowledge. Seems like a great first real-world lesson in budgeting.

$250K is an incredibly wonderful amount of money for an undergraduate education--wow! Do your kids have grad school aspirations? If so, and if $250K is the max for the entirety of their education, I wonder if they'd want to take that into consideration when selecting their undergrad institution. My husband and I both managed to come out of undergrad and grad school with no debt and it's the best financial start we could have possibly had. We're grateful every day. And, as it turns out, really didn't matter what schools I went to (large state school for undergrad, small private for grad). For me, and my FIRE goals, it's been vastly more important to be debt-free.

sarah8001

  • 5 O'Clock Shadow
  • *
  • Posts: 85
Re: How to spend the college 'stache
« Reply #7 on: July 28, 2014, 03:58:29 AM »
Why not tell them that no matter where they go, all their tuition and books are paid for (for classes that they need for their degree), but you'll only give them a set stipend (ex. 500$/month) for living expenses (room, board, extracurricular activities, extra classes taken for fun). This lets them choose to be super frugal, or get a job, work really hard, and support a more hedonistic lifestyle. They still get those uncomfortable lessons from overspending (if that happens), but it doesn't risk their education.

Cwadda

  • Handlebar Stache
  • *****
  • Posts: 2182
  • Age: 25
Re: How to spend the college 'stache
« Reply #8 on: July 28, 2014, 05:06:19 AM »
I pay for half of everything (parents pay for half, and then lend me the other half at 0%) and let me tell you - it has influenced how I am today to the nth degree. This includes tuition, room & board, when I bought my car, car insurance + repairs, everything. I have learned to go out and get things all on my own knowing that I will have a $40k debt by the time I graduate (and an entire determination to graduate debt-free). Basically it's why I found this mustachian lifestyle and learned to budget. I see a fair share of classmates whose parents pay for everything and they don't try.

I go to a state school and I'm glad I did. If your children think they need to be far away, it's not as far as they think! I am an hour away from home and I do get homesick. Definitely look into state schools - they can always go to the more elite schools for post-grad education.

Nubs

  • Stubble
  • **
  • Posts: 134
Re: How to spend the college 'stache
« Reply #9 on: July 28, 2014, 08:53:28 AM »
Everyone handles it differently. 

I had my college & living expenses paid for in full, but had already developed frugal habits from my parents and it never changed my effort level or spending.  With exactly the same upbringing and $$ situation, my 3 siblings have all taken slightly different paths. 

One dicked around, dropped out, went to community college and then back to a state college, got his shit together, and is now very successful, frugal, and happy.

One is still dicking around in college, partying and not putting a lot of effort in, manages his money poorly, and has not found the "right track" quite yet. 

The last one is a sophomore that is quite successful and determined, frugal, and on a good path. 

Especially for tougher situations where kids may not be ready for college right away or ones that have trouble finding themselves, there really seems to be no set way to do it.  I think having some skin in the game is probably a good way to go, but everyone is different and can take a different path to get to a good spot in life.  HOWEVER, I'm just making my own set of observations on a tiny data set.   ( :






Ynari

  • Bristles
  • ***
  • Posts: 478
  • Age: 26
Re: How to spend the college 'stache
« Reply #10 on: July 28, 2014, 09:09:11 AM »
My situation was similar to MAnton's.  My father paid for all expenses to my (top 10) school.  I debated whether or not to go here because the state school was a whopping $2000/year cheaper given financial aid.  (Yeah, I've always been frugal.)  But I visited the campus of state school and decided it just wasn't for me.  I'm glad for my decision.  I'll be graduating over half a year early, saving $$. 

My dad didn't want me to worry about having a job and directing time away from schoolwork and living a life.  I still had a job for some portion of my time to fund extracurriculars and books.

My siblings go to in-state school by choice.  My older sibling is taking 5-6 years to graduate but has to pay for anything past 4.  He spent some time finding himself, and that cost a lot of money...  He could have probable used a gap year instead of school to do some of that figuring out but sometimes it's tricky to know.

BTW I took a gap year, too, and so did my younger sibling.  Gap years are great as long as you have some purpose behind them - I studied for an important exam, had a part time job at a veterinarian, and took an opportunity to travel and be with family.  If you want to encourage cost-sharing and frugality, it'd also be a good time for kids to get a job.

Nubs

  • Stubble
  • **
  • Posts: 134
Re: How to spend the college 'stache
« Reply #11 on: July 28, 2014, 09:22:49 AM »
Also, don't put top ranked or Ivy league schools on a pedestal.  There are many amazing options out there from small liberal arts schools to large public universities and each one can offer opportunities that others can't.  Paying $60,000 per year for a prestigious college simply because it is prestigious could be a huge waste of money. 

Shit, with $250,000 and some savvy decisions you could pay for college AND grad school, and have plenty left over. 

nawhite

  • Handlebar Stache
  • *****
  • Posts: 1057
  • Location: An RV somewhere in the West
    • The Reckless Choice
Re: How to spend the college 'stache
« Reply #12 on: July 28, 2014, 10:02:47 AM »
One thing my parents did that I liked was that I had to pay for any class I got a C or worse in. (They thought about doing "I get one free C per semester to take a random class with" but that didn't work well for me).

If my parents had told me that there were $250k available I would have gone to the most expensive school I could find and never moved off campus to save money. Someone mentioned the idea of "we'll pay for all tuition but you're on your own for living expenses" which sounded like a good compromise to get the most out of school but also have a fair bit of skin in the game that they can get creative with how to pay for.

RyanAtTanagra

  • Handlebar Stache
  • *****
  • Posts: 1085
  • Location: SF Bay, CA
Re: How to spend the college 'stache
« Reply #13 on: July 28, 2014, 02:28:46 PM »
One thing my parents did that I liked was that I had to pay for any class I got a C or worse in.

This was going to be my suggestion as well.  Don't have kids yet but think about the college thing occasionally as I had mine partially paid for, and agree that those I saw with 100% paid for f'd off a lot.  I have mostly leaned towards paying 100% of As & Bs, 50% of Cs and nothing below that.

This might make it easier for them to pick a school they want without worrying about cost, while also encouraging them to work hard.

cygnus

  • 5 O'Clock Shadow
  • *
  • Posts: 12
Re: How to spend the college 'stache
« Reply #14 on: July 29, 2014, 04:36:25 AM »
Thank you all for the great input and advice.  That is why this forum is so great - like minded people who share their valuable insights to help others.

I think the "we will pay for tuition (for 4 years only) and they pay for their living expenses" is a good way to have them make some contribution without being overly burdensome.  Not sure about grad school, but we will cross that bridge when we get to it.

Another topic I am considering is how to handle scholarships.  Let say they get a 50% athletic scholarship - I was thinking of splitting the savings with them and giving it to them for grad school, house downpayment or some other big expense after college.  Thoughts? 

jzb11

  • Stubble
  • **
  • Posts: 139
Re: How to spend the college 'stache
« Reply #15 on: July 29, 2014, 06:30:27 AM »
I think the major is just as important, if not more important than the school. I would encourage your children to pursue pragmatic/useful majors with a proven track record of employment (most obvious being STEM).

I didn’t have the guidance your children had, but I ended up studying IT at a private university. The total cost of my bachelor’s was 76,000. I paid 30,000 out of that via cash and student loans, the rest covered by grants/scholarships/etc.

My education was simply not worth the premium. I could have received the same education at a public university for $24,000. I am fortunate in that I found an internship my junior year which led to my full time employment after graduating. I have been working for that company since and am earning a great salary as thirty year old. I paid off my student loans soon after graduating college (25k) living rather frugally (making 1500 student loan payments on 2300 net).

I wish I could have done things different in terms of my education, though it has all worked out in the end.

It seems your children understand frugality and the value of a dollar so they’re in a good place. But ultimately I think it’s better for them to go to an inexpensive university unless they have an Ivy League opportunity that will open them up to opportunities that would not be available otherwise.

Gifting them the money for a home etc. post university is a wonderful thing and again assuming they understand the value of money and are frugal, I’m sure they’d appreciate how much of a help it would be.

Cwadda

  • Handlebar Stache
  • *****
  • Posts: 2182
  • Age: 25
Re: How to spend the college 'stache
« Reply #16 on: July 29, 2014, 07:26:16 AM »
Quote
Another topic I am considering is how to handle scholarships.  Let say they get a 50% athletic scholarship - I was thinking of splitting the savings with them and giving it to them for grad school, house downpayment or some other big expense after college.  Thoughts?

If that were to happen to me, personally I wouldn't want to know in advance. I would rather go through school and find out later.

Anyway, you are an intelligent, successful person. You will figure out a plan that works and makes everyone feel comfortable. Just stick to it and you will have a perfect plan!

Apples

  • Pencil Stache
  • ****
  • Posts: 877
Re: How to spend the college 'stache
« Reply #17 on: July 29, 2014, 07:47:34 AM »
My parents told us from the start they would pay for 4 years of school tuition/fees/etc. but after sophomore year we were on our own for living expenses.  But drive and work ethic had pretty well been drilled into us...there's nothing like picking peaches when it's 90 degrees or digging out an irrigation line during the summers in high school to remind you how awesome education is.  My dad always called it "motivation for higher education-you don't want to do this for 40 years".  I got an ag degree to go back and run the farm, and my first brother is studying to be a mechanical engineer.  My youngest brother isn't sure yet, but is still in high school.  I think they show us every summer why we should be driven to do well in school, b/c our easy safety net is doing more of that type of work on the farm.  So we didn't **** around in school like I  know certain suburban spoiled brats did.  ahem. Though I did have to keep my grades up to keep my scholarships.

As to the scholarship scenario...I earned myself a full ride though a patchwork of scholarships, and they included stipends.  I made thousands of dollars in college due to that.  And I chose to attend that state school rather than go to an Ivy where I had been accepted but there weren't nearly as many dollars of scholarships offered.  And there's no formal arrangement that I get to keep their savings, although they did pay for my wedding, which was always a known expectation anyway.  Due to other circumstances it may end up evening out, but it was never a given that would happen.

Nubs

  • Stubble
  • **
  • Posts: 134
Re: How to spend the college 'stache
« Reply #18 on: July 29, 2014, 08:04:17 AM »
Quote
Another topic I am considering is how to handle scholarships.  Let say they get a 50% athletic scholarship - I was thinking of splitting the savings with them and giving it to them for grad school, house downpayment or some other big expense after college.  Thoughts?

If that were to happen to me, personally I wouldn't want to know in advance. I would rather go through school and find out later.

Anyway, you are an intelligent, successful person. You will figure out a plan that works and makes everyone feel comfortable. Just stick to it and you will have a perfect plan!


+1

I agree.  Better to not know in advance.  My mother picked up this quote somewhere and it is part of her philosophy:  "Affluence rarely brings out the best in people."   Tens of thousands of dollars can seem like a whole lot of money to someone that young.  I'd personally be happier thinking I was poor, living in the moment during college, and then learning afterwards that I had a great little nest egg to start out. 

MrsPete

  • Magnum Stache
  • ******
  • Posts: 3519
Re: How to spend the college 'stache
« Reply #19 on: July 29, 2014, 08:10:33 AM »
I'd suggest you give the kids general information on how much you're willing to spend on college.  We told our kids that we would pay for 4 years at a state school:  Tuition and fees, dorm room and meal plan.  OR Tuition and fees for the university 30 minutes down the road and a car.  We told them we would not fund extra semesters beyond the 4 years or private /out-of-state schools.  And with those ideas in mind, we started visiting schools. 

At the same time, be flexible with your guidelines.  For example, when we told our oldest that we'd pay the above expenses, we didn't know that all nursing majors must attend a mandatory summer school between the sophomore and junior year.  We'd said earlier we weren't willing to pay for summer school, but we meant we weren't willing to pay extra tuition so she could have light semesters or because she'd failed a class.  This was different, and we paid it.  Also, when we started this process, we didn't realize that her university included books in the tuition.  These are the things that vary from school to school, and you can't really know what to expect until you and the student choose the school. 

Junior year is the perfect time to visit colleges, and with both of our kids we visited LOTS.  We talked and compared the schools, money being one important piece of the puzzle.  We helped them see the things that really mattered; for example, our youngest was temporarily enchanted with one certain school because of its lovely setting and fantastic dorms -- but when we pointed out that her choice of majors would be greatly limited, she began to put things into priority.  My oldest was temporarily interested in an out-of-state school with a big name and a big football program -- but when she began to investigate details, and she learned that it's a big Greek school, she decided that just wasn't her thing.  Kids can't make informed decisions if they don't visit and talk and discuss!  Yet I see so many of my high school students make their college choice based upon very superficial items; those are the students who either leave college altogether or transfer (and transferring is an expensive option in terms of money, trouble, and time-to-graduation). 

Making the actual decision is difficult, and I'm not sure it isn't more difficult when your kid is the "high honors student" for whom so many options are available.  You have to make decisions without knowing final costs and scholarship possibilities.  Note:  Most scholarships are not school-specific, so don't hold out too long with those hopes.  My oldest fell in love with two schools and had a hard time choosing between them.  I really think either one would've served her well, but she LOVES the school she chose and has had a great two years thusfar. 

What the student plans to study comes into consideration too.  For example, my oldest is studying nursing; thus, her degree -- whether it's from State U or Private-Snooty-Schools-R-Us -- will never get her a job.  Rather, the degree will allow her to sit for the exam that will allow her to be licensed by the state, and THAT will get her a job.  In contrast, if one of your kids is interested in politics, he or she may need to attend THE SCHOOL.  In general, I'm not into paying for a prestigious university.

In general, the more guidance you provide, the better choice they (and you) can make.  18 year olds often don't have a clue about what they want to do and how they should best spend your hard-earned college money.  My girls are good students, serious about college -- but the oldest definitely benefited from massive amounts of guidance in making her decisions, and we're still going through that process with the youngest.

Finally, don't worry too much about the possibility of a kid frittering away your hard-earned money.  In reality, this should never happen.  Yeah, we all know kids who've done it -- for example, my high school boyfriend did it.  He had top grades in high school and plenty of ability, yet his mother had babied him and supervised his homework every day (yes, even when he was a senior!).  She'd sit him down at the table with a plate of cookies and make sure he did all his work every day.  No surprise that he had no SELF-discipline, and out on his own, he fell on his face.  Details vary, but most often the student who "isn't going to make it" has shown signs of this ahead of time. 

First, the kid you're sending away to school is the same one who's been living with you for 18 years.  In your heart of hearts, you know whether he's college material, you know whether he's serious about this opportunity, and you know whether the school he's choosing is a good fit.  If you have any reservations, SAY NO.  If you fear your student isn't emotionally or academically ready, insist upon a year at community college.  Second, every student should be on the semester plan.  That is, you pay for the first semester, and upon receipt of good grades, you pay for the second semester.  If the good grades aren't forthcoming, you stop and reconsider your choices.  Does the student need to change schools and come home to live?  Is having a car on campus too much of a distraction?  Did he just not study enough?  If things don't go well that first semester, MAKE CHANGES.  A student might fool one semester, but if you allow it to go on and on, it's on you! 

And if you end up with extra money?  That's an individual decision that you have to make for each student.  In our case, our oldest ended up with some very nice scholarships . . . and we bought her a car (with the money we didn't spend on tuition).  With student nursing coming up in the fall, this was a real need, and we all felt good about the choice.  For another student, this money might've gone to cover the extra expenses of a semester abroad or graduate school or an apartment off campus. 




 


unpolloloco

  • Stubble
  • **
  • Posts: 185
Re: How to spend the college 'stache
« Reply #20 on: July 29, 2014, 03:24:15 PM »
I'd vote tell them how much you're willing to spend per year and for how many years.  Then they can make the choice as to what school fits best with their career, educational, and financial goals.  Puts the responsibility in their hands to find jobs, scholarships, etc. to fund the extra if the school costs more.  Just make sure to TELL THEM what you are willing to spend before they start seriously looking at schools.

That said, I'd limit the $$ amount to significantly less than the $250k/kid.  Don't tell them about extra and then use it for helping with their first houses/cars/whatever instead. 

Beric01

  • Handlebar Stache
  • *****
  • Posts: 1156
  • Age: 29
  • Location: SF Bay Area
  • Law-abiding cyclist
Re: How to spend the college 'stache
« Reply #21 on: July 29, 2014, 05:26:58 PM »
I think the problem here is that "helping" your kids really may not help them.

I paid for my community college with my job. A big MMM thing here - don't send your kids to a 4-year school straight off! You're paying ridiculous prices for the identical general education classes you can take at a community college for 1/10 of the cost. And, if you go to a decent community college and get good grades, you can transfer to any school in the world. So you save a ton of money and it doesn't set you back. All of my community college classes transferred over.

The other question is: how many people really know what they want to do for a career at 18? I spent 2 years at my community college before transferring to a 4-year and doing my last 2 years there. In those first 2 years, I was able to try a bunch of different classes and decide what field was really right for me. You don't get that in a 4-year where you have to decide your major first thing, and it's difficult to change it after the fact.

On paying: my parents helped me out for about 20% of my total costs, if that. That's the thing: you don't value something if you aren't paying for it. I worked way harder knowing that my money was ultimately on the line. It also meant I wouldn't choose a BS major with no career potential. My parents co-signed on low-interest private loans (5% interest - better than the government loans), which I paid off myself - I'm 2 years out of college now.

I honestly don't think parents should pay for their kid's education, or at least not a significant portion. I think it ultimately hurts them, particularly in understanding the value of money.

Read this article: Want Your Kids to Succeed? Don't Pay For Their Education
« Last Edit: July 29, 2014, 05:30:13 PM by Beric01 »

Goldielocks

  • Walrus Stache
  • *******
  • Posts: 6251
  • Location: BC
Re: How to spend the college 'stache
« Reply #22 on: July 29, 2014, 06:11:50 PM »
Another idea

I remember reading that if you put $50k into a Retirement fund for your child by the time they are 18, then their retirement savings could be virtually covered...

$250k seems to be a staggering amount of money for education if it is just handed over... 

sarah8001

  • 5 O'Clock Shadow
  • *
  • Posts: 85
Re: How to spend the college 'stache
« Reply #23 on: July 30, 2014, 01:46:11 AM »
I second the community-college-first thing. I wanted to be a nurse, but was lured into the lab tech program during my pre-reqs. I am sooo much happier than I would have been as a nurse, and it was so much cheaper at a community college. If they go into a technical field (like nursing or lab tech-ing) I would recommend getting a bachelors eventually, even if they can sit for exams after a two year degree. A bachelors can open a lot of doors and significantly raise the glass ceiling that almost always accompanies these degrees. In my experience.

daymare

  • Bristles
  • ***
  • Posts: 463
  • Age: 29
Re: How to spend the college 'stache
« Reply #24 on: July 30, 2014, 11:04:36 AM »
I find the notion that you need to be paying for your education (at least in part) in order to truly value it and be responsible, quite interesting.  My parents paid for everything for my undergrad at Carnegie Mellon (tuition, books, housing, generous food allowance) and being a conscientious person, the fact that my parents were spending so much money on my education was VERY motivating and left me feeling a lot of responsibility for doing well given their large sacrifice.  (And mostly, I had a huge internal drive thanks to how they raised me.)

What I think is most important is to be clear with your kids on what you will pay, in advance of their applications.  My family places a huge value on education (3 of 4 grandparents have PhDs, as does my dad, while my mom has two masters), but I found it extremely stressful when my parents basically told me "we'll pay for your education ... as long as we can.  We can probably pay for all of it ... probably" because it was really stressful not to know whether I would have to pay for some of it, whether I might need to take out student loans, what the deal with my parents' finances was, etc.

It sounds like you have great kids - I would err on the side of being forthright about the amount of money you have saved.  I think it's especially a great idea to think about what you might consider using that money for if their undergrad costs less than $250K - possibly graduate or professional school, future house down-payment.  Get them thinking about how useful the money could be down the road, and the benefits of not using it up due to attending an expensive college.

nawhite

  • Handlebar Stache
  • *****
  • Posts: 1057
  • Location: An RV somewhere in the West
    • The Reckless Choice
Re: How to spend the college 'stache
« Reply #25 on: July 31, 2014, 09:41:39 AM »
I find the notion that you need to be paying for your education (at least in part) in order to truly value it and be responsible, quite interesting.  My parents paid for everything for my undergrad at Carnegie Mellon (tuition, books, housing, generous food allowance) and being a conscientious person, the fact that my parents were spending so much money on my education was VERY motivating and left me feeling a lot of responsibility for doing well given their large sacrifice.  (And mostly, I had a huge internal drive thanks to how they raised me.)

Fellow CMU grad here! I have to say that you are one of 2 people I've ever heard of where having everything paid for made you more responsible. In every other case I'm aware of, having no skin in the game made the student less responsible.

My parents paid the amount that would have given me a full ride after scholarships at the cheapest school I liked and I got into. If I wanted a more expensive school, that was my choice and my responsibility to pay for. CMU was about $10k more expensive per year than the cheapest school I got accepted to so I paid $10k/year plus tuition for any class I got a C or worse in. Kept me pretty motivated personally, a full ride wouldn't have at all.

Ynari

  • Bristles
  • ***
  • Posts: 478
  • Age: 26
Re: How to spend the college 'stache
« Reply #26 on: August 01, 2014, 09:13:06 AM »

Fellow CMU grad here! I have to say that you are one of 2 people I've ever heard of where having everything paid for made you more responsible. In every other case I'm aware of, having no skin in the game made the student less responsible.

My parents paid the amount that would have given me a full ride after scholarships at the cheapest school I liked and I got into. If I wanted a more expensive school, that was my choice and my responsibility to pay for. CMU was about $10k more expensive per year than the cheapest school I got accepted to so I paid $10k/year plus tuition for any class I got a C or worse in. Kept me pretty motivated personally, a full ride wouldn't have at all.

I think responsible-with-other-people's-money folks are just a little quieter than the people who waste their parent's money.  :)

I grew up always thinking of my dad's money as my money.  I knew his general financial picture (not everything, but I was aware of the system) and I knew that each purchase I caused (whether it was wanting that big exciting telescope or getting braces) decreased the funds I would have available for other causes (my college, my sibling's college, my father's retirement...)  He would say "I'd live in a shack if it meant making you kids happy."  Luckily he hasn't had to do that, but we talk about investments sometimes.  He cashed out what few stocks he had to pay for my sister's college.  He's got a great pension though so it's not a big deal.

I wasn't THE MOST frugal person in college but I wouldn't have been more frugal if I had a job - probably less frugal, because I wouldn't have felt as guilty about spending "my money".   As an economics major, I was aware of but still unable to resist my own personal consumption smoothing especially after I got my $$$ internship.

I was really stressed out in college.  I went to counseling for it.  If I had a "work to pay for school, don't do anything that costs money, scrimp scrimp scrimp, or drop out since you can't afford it" mindset, I'd've been even more miserable and not where I am today.

Wow, sorry for sharing my life story there...  Everybody is different, and in my instance it wouldn't have been wise to let me pave my own financial way.

Less

  • Stubble
  • **
  • Posts: 178
  • Age: 32
  • Location: New Zealand
    • Journal
Re: How to spend the college 'stache
« Reply #27 on: August 02, 2014, 02:25:16 PM »
I agree with Beric. At 18 they probably need to give some serious thought to what they want to do.  Knowing that your parents expect to pay for university can be a big pressure. 

I would say talk to your kids about what direction they want to take,  and what benefits each path will have down the track. 

Could be a good lesson in cost benefit analysis, if up front your kids believe that they are going to bare the costs. Once they make their choice then you can look at what support you can offer.  I am also a fan of under promising and over delivering.  My parents matched every dollar I paid towards my uni costs but then we're kind enough to chip in for things along the way (flights home for holidays, some extra food money while I was off work during exams etc. )

MrsPete

  • Magnum Stache
  • ******
  • Posts: 3519
Re: How to spend the college 'stache
« Reply #28 on: August 04, 2014, 08:50:56 AM »
I think the problem here is that "helping" your kids really may not help them.

I paid for my community college with my job. A big MMM thing here - don't send your kids to a 4-year school straight off! You're paying ridiculous prices for the identical general education classes you can take at a community college for 1/10 of the cost. And, if you go to a decent community college and get good grades, you can transfer to any school in the world. So you save a ton of money and it doesn't set you back. All of my community college classes transferred over.

The other question is: how many people really know what they want to do for a career at 18? I spent 2 years at my community college before transferring to a 4-year and doing my last 2 years there. In those first 2 years, I was able to try a bunch of different classes and decide what field was really right for me. You don't get that in a 4-year where you have to decide your major first thing, and it's difficult to change it after the fact.

On paying: my parents helped me out for about 20% of my total costs, if that. That's the thing: you don't value something if you aren't paying for it. I worked way harder knowing that my money was ultimately on the line. It also meant I wouldn't choose a BS major with no career potential. My parents co-signed on low-interest private loans (5% interest - better than the government loans), which I paid off myself - I'm 2 years out of college now.

I honestly don't think parents should pay for their kid's education, or at least not a significant portion. I think it ultimately hurts them, particularly in understanding the value of money.

Read this article: Want Your Kids to Succeed? Don't Pay For Their Education
This is a valid opinion, but it isn't necessarily fact. 

My parents paid for NONE of my education, nor would they allow me to live at home during college or provide any guidance towards college or career.  Admittedly, they weren't financially able to write big checks -- I knew that -- but the "don't let the door hit you" method was more harmful than helpful.  I sometimes lived in dangerous places, I was sometimes hungry, and I always worked more than was reasonable.  Though I did well academically, I could have done better if I had been pushed so hard. 

In contrast, we're covering our children's college expenses.  Our oldest chose a moderately-priced school and has made frugal decisions along the way.  She is studying for a career in which she's sure to be employable, and she is working hard and maintaining a near-perfect GPA.  She and I have a much better relationship than I have with my parents. 

MrsPete

  • Magnum Stache
  • ******
  • Posts: 3519
Re: How to spend the college 'stache
« Reply #29 on: August 04, 2014, 08:54:18 AM »
Another idea

I remember reading that if you put $50k into a Retirement fund for your child by the time they are 18, then their retirement savings could be virtually covered...

$250k seems to be a staggering amount of money for education if it is just handed over...
You have more than enough for a college education -- I think putting a portion into a retirement account is a WONDERFUL idea.  The world of work is changing, and it's becoming more and more difficult to be successful.  I think a secure retirement account (with decades to grow) may well be more beneficial to your children than having the choice of ANY college. 

Keep in mind that paying for college doesn't mean handing over 250K in one fell swoop.  You pay first semester, then you pay second semester, and so on.  If at any point things aren't going well, you stop paying. Then you fall back, regroup, and proceed with a new plan.  No one has suggested handing an 18-year old a check and saying, "Manage it well, son!" 

MrsPete

  • Magnum Stache
  • ******
  • Posts: 3519
Re: How to spend the college 'stache
« Reply #30 on: August 04, 2014, 09:12:04 AM »
I think responsible-with-other-people's-money folks are just a little quieter than the people who waste their parent's money.  :)
Yes, and the bad examples tend to stick with us -- especially because we all lean towards frugality, and we are strongly opposed to wastefulness.  But I knew lots of people in college whose parents were paying, yet they worked hard.

In fact, my roommate was TOO invested emotionally in the idea that her father was paying for her education:  He was a wealthy man who'd worked his way up from nothing -- but he'd instilled in his children the idea that you want value for every dollar.  My roommate did super-well in her freshman and sophomore years, when she was just taking classes and labs . . . but when she reached her junior year and began student nursing, things changed.  She hated the hospital.  Hated the smell, hated touching sick people, hated the atmosphere.  She went to the hospital Monday - Thursday, and on Monday morning she'd leave crying out of dread, and on Thursday afternoon she'd return crying out of relief.  I kept telling her, "You have to tell your father that you hate this.  You have to quit nursing."  And every time she'd cry harder and reply, "No, I can't let him down.  Not after he's spent so much on me.  I have to finish what I've started, even though I hate it so much."  She lasted until Thanksgiving, and she finally told him how she felt.  He wasn't stupid -- he'd known something was wrong, but he'd incorrectly thought it had to do with her boyfriend.  Anyway, her father encouraged her to drop out of school, get a job during spring semester, then go back the next fall with a new major. 

People's behavior is complicated, and everyone's situation is different.  You cannot predict success or failure based simply upon whether the parents are paying. 

Alternate moral:  Encourage your children towards experiences that will help them measure their real interest in a given career before they begin college.  Do not allow them to choose based upon superficial ideas that may or may not be correct. 

daymare

  • Bristles
  • ***
  • Posts: 463
  • Age: 29
Re: How to spend the college 'stache
« Reply #31 on: August 04, 2014, 12:11:16 PM »
Quote
Fellow CMU grad here! I have to say that you are one of 2 people I've ever heard of where having everything paid for made you more responsible. In every other case I'm aware of, having no skin in the game made the student less responsible.

Hmm, you know, I think my main point is that because of how my parents raised me and my personality, their paying for my education didn't make me spoiled or lazy or ruin me (and that OP seems to be in a similar situation, from the parent side).  I am so unbelievably grateful to have my undergrad paid for.  And I think having no debt made me that much more debt averse (so, wasn't considering masters degrees that would have required me to pay) because I didn't want to ruin this amazing gift of no-debt that my parents gave me. And now I have about 50k in retirement accounts at almost 25, in a PhD program that pays me.  And while I'm certain life would be just great had my parents paid nothing, and had I gone to a state school, there is no way I could have my life that I have now, I wouldn't have had some of the opportunities for work and education.

I completely understand people who don't feel obligated to pay for their kids college (though I would want to), but I really don't get the level of suspicious and derision that paying will inevitably lead to bad outcomes, to spoiled and lazy students.  Your kid is this person you've raised for 18 years ... You know them, you have influence on them.  And you're not handing them a wad of cash, you're taking things semester by semester, evaluating after each if necessary (as mentioned above).

Cwadda

  • Handlebar Stache
  • *****
  • Posts: 2182
  • Age: 25
Re: How to spend the college 'stache
« Reply #32 on: August 04, 2014, 12:21:10 PM »
Personally, knowing I have a financial burden has pushed me to new limits that I didn't know were possible and otherwise wouldn't be possible without financial "pressure". It's basically what brought me to MMM in the first place.

I haven't experienced the two extremes - paying for nothing and paying for everything - but I would consider myself in a better position than most people I know who aren't being held to paying for things. And now I wonder every day what else I could achieve if I were to be paying for everything...I think I'll have my future children pay for half of it just like I'm doing now. It's a very healthy stress IMO.

Beric01

  • Handlebar Stache
  • *****
  • Posts: 1156
  • Age: 29
  • Location: SF Bay Area
  • Law-abiding cyclist
Re: How to spend the college 'stache
« Reply #33 on: August 04, 2014, 12:22:01 PM »
Quote
Fellow CMU grad here! I have to say that you are one of 2 people I've ever heard of where having everything paid for made you more responsible. In every other case I'm aware of, having no skin in the game made the student less responsible.

Hmm, you know, I think my main point is that because of how my parents raised me and my personality, their paying for my education didn't make me spoiled or lazy or ruin me (and that OP seems to be in a similar situation, from the parent side).  I am so unbelievably grateful to have my undergrad paid for.  And I think having no debt made me that much more debt averse (so, wasn't considering masters degrees that would have required me to pay) because I didn't want to ruin this amazing gift of no-debt that my parents gave me. And now I have about 50k in retirement accounts at almost 25, in a PhD program that pays me.  And while I'm certain life would be just great had my parents paid nothing, and had I gone to a state school, there is no way I could have my life that I have now, I wouldn't have had some of the opportunities for work and education.

I completely understand people who don't feel obligated to pay for their kids college (though I would want to), but I really don't get the level of suspicious and derision that paying will inevitably lead to bad outcomes, to spoiled and lazy students.  Your kid is this person you've raised for 18 years ... You know them, you have influence on them.  And you're not handing them a wad of cash, you're taking things semester by semester, evaluating after each if necessary (as mentioned above).

The problem is, it's human nature not to value something as much if we don't pay for it. My parents paid for my orthodontia, and I don't even wear my retainers now. Why? I didn't pay for it, so I don't value it.

I'm sure there' some amazing self-motivated people out there, but it's simply amazing how much more you value something if you're covering the cost for it.

MrsPete, it sounds like your issue was more one of a poor relationship with your parents than whether they paid for your education or not.

stor_stark

  • 5 O'Clock Shadow
  • *
  • Posts: 43
  • Location: Colorado
Re: How to spend the college 'stache
« Reply #34 on: August 04, 2014, 05:45:40 PM »
Hmm, you know, I think my main point is that because of how my parents raised me and my personality, their paying for my education didn't make me spoiled or lazy or ruin me (and that OP seems to be in a similar situation, from the parent side).  I am so unbelievably grateful to have my undergrad paid for.  And I think having no debt made me that much more debt averse (so, wasn't considering masters degrees that would have required me to pay) because I didn't want to ruin this amazing gift of no-debt that my parents gave me. And now I have about 50k in retirement accounts at almost 25, in a PhD program that pays me.  And while I'm certain life would be just great had my parents paid nothing, and had I gone to a state school, there is no way I could have my life that I have now, I wouldn't have had some of the opportunities for work and education.

I completely understand people who don't feel obligated to pay for their kids college (though I would want to), but I really don't get the level of suspicious and derision that paying will inevitably lead to bad outcomes, to spoiled and lazy students.  Your kid is this person you've raised for 18 years ... You know them, you have influence on them.  And you're not handing them a wad of cash, you're taking things semester by semester, evaluating after each if necessary (as mentioned above).

+1 to all of this. My parents have done some pretty nice things for me in my life, but helping me to graduate with a STEM degree (and MS) with no debt is by far the one for which I'm most grateful.

My parents' direct financial assistance and guidance in helping me to choose a undergrad school that offered me really lucrative scholarships over possibly more prestigious and definitely more expensive universities was such a huge part in allowing me to remain debt free. I suppose I was lucky that my preferred school ended up being by far the cheapest option, in addition to being one of the best public/state engineering schools in the nation.

In my opinion, the way you were raised and the values that were instilled in you are what cause you to be fulfill your potential in college, not the source of the funding. I appreciated the value of my own money and my parents' because they encouraged - or forced depending on who you ask ;) - me to work throughout middle and high school. I was able to save a large part of my earnings and also pay for some of my minor expenses.
« Last Edit: August 04, 2014, 05:48:44 PM by stor_stark »

Little Nell

  • 5 O'Clock Shadow
  • *
  • Posts: 81
Re: How to spend the college 'stache
« Reply #35 on: August 04, 2014, 10:14:58 PM »
My parents paid for my undergraduate degree, my brother's and my sisters as well. All three of us used the opportunity responsibly. All three of us have advanced degrees and are doing well in our professions. It's the parent's lessons about money over the years that sink in.

And people are different: some people only value what they've paid for; others appreciate a gift and use it to the fullest. Neither way is wrong. You have to figure out which way works best for your kids.

Beric01

  • Handlebar Stache
  • *****
  • Posts: 1156
  • Age: 29
  • Location: SF Bay Area
  • Law-abiding cyclist
Re: How to spend the college 'stache
« Reply #36 on: August 05, 2014, 01:38:24 AM »
My parents paid for my undergraduate degree, my brother's and my sisters as well. All three of us used the opportunity responsibly. All three of us have advanced degrees and are doing well in our professions. It's the parent's lessons about money over the years that sink in.

And people are different: some people only value what they've paid for; others appreciate a gift and use it to the fullest. Neither way is wrong. You have to figure out which way works best for your kids.

This is very true. It really depends on the individual.

All I can say in college though, is that some of the kids who were the worst slackers and stayed in school 6+ years had they parents paying their way in full. Even at my community college, I bumped into people who had been going 7 years plus. You got it - their parents were paying.