Why We Plan to Pay for Our Kids’ College Education

Over the years, my opinion on college funding has shifted a bit. I used to be of the opinion that kids should be responsible for paying for their own college education. After all, I paid for most of mine, and I was one of those parents that thought, “If I can work my way through school, then so can my kids.”

Well, that stance has softened a bit over the years, for a variety of reasons. The student loan industry itself has a lot to do with the way I feel, but the majority of my shift has been in the way I view the education of my children, both in a formal setting and through informal learning at home.

Our College Experience

My wife and I both struggled in college to meet financial obligations. I turned to student loans to finance my tuition, and after returning to school years later, I turned to Visa. My wife shared a similar experience, often struggling to cover rent and living expenses while in school.

My first year or so of college was pretty well covered by my mom, who somehow managed to carve out tuition, and room and board out of her own household bills. I worked part-time at a local fast food restaurant, then a vitamin store, and finally a sports retail store in the local mall. I spent the summer after my freshman year working for a landscaper – mowing lawns and digging trenches for in-ground sprinkler installation.

It was tough working and going to school – no doubt about it. I remember one particularly bad time during a winter quarter when the old car I took to college quit running and I had to walk to work off campus, at night, in the cold, and yes, it was uphill in both directions (or so it seemed)!

I spent much of that time feeling sorry for myself, which did little to help the situation. Of course, later I realized it was a good experience. The part-time work covered my groceries and incidentals, and Discover covered the rest, since they were nice enough to give me a credit card application at a football game in exchange for a free t-shirt.

Those student loans, and the college credit card debt, haunted me for much of my early 20s, but I had nowhere near the average student loan debt most college graduates have these days (around $25,000, according to the latest figures). In fact, total outstanding student loan debt now exceeds credit card debt.

The Gift of Education

I don’t believe college education is a right, and I do not believe my kids are entitled to a college degree. For that reason, I choose to consider it a “gift.” I’m not loaning the money to my kids, and I’m not asking them to take out loans. I’m not asking them to go into debt, either to me or the federal government.

We are gifting our kids money that we will have set aside their first 18 years of life for the purpose of obtaining an education in a field they are passionate about first, and will support their lifestyle, second.

That’s not to say they won’t have some skin in the game. They will be expected to work during the summer for their own spending money, and they will be expected to pay for certain items as high school students, either from an allowance and/or part-time work. However, it is my goal to get them through college, should they choose to attend, without accumulating debt.

What If My Kids Don’t Go to College?

If our kids decide instead to learn a trade, or start their own business, or take some other path, we’ll use the money to help there as we can (minus the tax penalty from withdrawing 529 money and it not being used for education).

That might look like investing in a mechanic’s set of tools for my son, or giving my daughter some seed money to start a business, or helping either of them with licensing or specialized training (outside of college) they may require to do what is they love to do. Who knows what that might be.

The Sooner You Start Saving, the Less You Have to Save

I recommend parents start saving for college early. Celebrate the arrival of your baby by opening up a 529 college savings plan and begin investing, even if only small amounts. Grandparents and aunts and uncles can contribute money as well. The longer you have to invest, the less you have to contribute each month.

As kids get older, encourage them to open their own savings account at a local bank, or somewhere like ING Direct, that now offers a savings product specifically for kids at a higher interest rate than most traditional banks.

Introduce kids to the magic of compounding interest. Help them learn the mechanics of banking – checking balances online, reading a statement, completing a deposit slip, and most importantly, balancing a ledger.

I would be remiss if I didn’t mention this final point. Be sure to take care of your own financial needs first. As they say in airline travel, in an emergency you should put on your oxygen mask before helping others with theirs.

Before heavily funding college savings for your kids, be sure you are socking away enough for your own retirement. It’s natural to want to put your kids first, however, if you don’t take care of your financial future you may become a burden on them later. After all, there are no grants or scholarships for retirement.

I’d like to get your comments on the idea of paying for college. How are you planning for the expense in your family? (Note, there is no wrong answer here, as everyone has a unique financial situation and value set).

Comments

  1. I couldnt agree more…our kids dont have the ability to utilize compounding interest to save for their own education like we do, not to mention the tax benefits of the 529 plan. Just because our children may be adults right when they hit college, doesnt mean that we are any less responsible for supporting them until that age…and quite honestly, I think making sure they are financially prepared for school is part of that.

  2. I’d also make sure you tell your kids your expectations regarding grades, if you have any. I paid for the first semester of college for my daughter, who had good grades in high school. She failed every class, but had a wonderful time socially. That was the end of my contribution to her education.

    • That’s a very good point, as it makes sense to set that expectation up front. If you pitch it as an investment in their future, one that you worked and saved long and hard for, perhaps it will make some impact.

      I’m not naive though; I know freshman year of college is all about socliazing/spreading wings/having fun. But I wish more kids would consider the opportunity they have and not squander it.

  3. I think if the parents are finacially able, and have already funded their own retirement, and if they want to it is a great gift to help your kids through college.

    I am a single mom with two boys (ages 13 & 8.) I have $0 in my own retirement account as I am self employed. Plus some months we can’t even buy food (and I work a lot, but bills are high.) So until I can pay all monthly bills, then save for my retirement I can’t even think about helping my boys with college.

    I do want to save for retirement first so they are not responsible for me when I am older.

    • Unless their dad is wealthy- we (meaning the country) will probably be helping your boys through school on grants.

      • I hope that reply was meant to be helpful and kind and not condescending. Because from where I’m sitting, that’s how it comes across.

        • Thanks Pat, I do the best I can, I can’t control what my ex husband does.

          I love my boys and it is very important to me to pay all my own bills, have no debt, not be on government assistant, and teach my boys to give money away, save, and spend only what they have on things they really need. (Because of God we bought a house two years ago with $25,000 down, and have only a mortgage debt and one credit card that I am working on paying off. I used it mostly for medically as our insurance has a $3,000 deductable.)

          I commented because I really enjoy reading this blog and wanted to give the point of view of someone who can not help pay for college. And to add I think it is better to have retirement so your kids do not have to support you one day. That to me is a better gift than the gift of an education.

      • I made a bad choice in a husband, yes, but can not do anything about it now. I am lucky if I see my $400 a month child support (which I haven’t in a bit.) So he is not wealthy. But worse is that he has moved on with his life and doesn’t have a relationship with my boys.

        I wish things were different, but I work about 60 hours a week (and it will be 72 starting mid June) just to pay all my bills. There is nothing else I can do, but I pay taxes as well. And hopefully even if you (the tax payers) have to contribute to my boys education then they will turn around and contribute more than they ever received.

        My boys already have their own businesses (the 13 year old pet sits, the 8 year old does house sitting stuff like watering gardens.) They also help me with my childcare and house cleaning businesses. They are hard workers.

        • Becky,
          I for one will be honored to help your boys through college. Just like it is a good investment for parents to help their children with education expenses, it is a good investment for the nation to contribute to the education of otherwise wouldn’t have the chance or would be swamped with debt.

  4. This sounds very similar to my parents’ approach to paying for my undergraduate degree. They made sure I didn’t graduate with a dime of debt and I did my best to help reduce the cost through scholarships, a part time job for spending money, and becoming an RA. I was and still am very, very grateful to my parents for giving me the opportunity to graduate without student loans and I’m trying to do the same for myself for my MBA.

  5. Have a look at this documentary (youtube: College Conspiracy). It’s a bit extreme and contains some irrelevant and strange recommendation, but it is about the devaluation of higher education in the US. I think it has a few good points.

    I guess there is limited downside to starting the fund even if they don’t go, as you mentioned.

    • I saw it last week. I agree that the cost of an education is beyond what a young person should be saddled with when they start off in life. I see the tuition bubble popping and lots of schools shuttering and lots of formerly high earning college employees being reduced to manual labor if they can even do that. It was produced by goldbugs so they adocated investing in metals, not going to college and buying a house in 4 years with profits on the investment. We shall hide and watch what happens.

  6. We plan on paying for college provided: 1) kid gets acceptable grades, 2) kid works for “spending money” and supplies, 3) kid tries to get scholarships, etc.

    Both of our parents did this for us and it was wonderful. Grad school was on our own, though our parents did help with some living expenses when times got hard.

  7. I think parents should save first for their retirement but I do find it wrong, morally, for parents to help with college, if they can afford to. My reasoning behind this, is that parent’s income/savings is taken into account when deciding grants/subsidized student loans. Because my mom made over a certain amount, and was unwilling to pay I had to work when some of my classmates did not because of either their parent’s willingness to pay or their parent’s income being lower. Until a student can be declared independent, and especially if you still claim the student as a dependent on your taxes, I think parents have some moral responsibility to help.

  8. It’s sad that student loans have become what they are, because I’ve been glad that I was able to pay for some of my college education after the fact–when I was able to earn the money. But it seems things aren’t that simple–they’ve changed in just a few years.

    Why not expect your kids to work a little during the school year, too? There’s a study that showed kids who work during school do better, probably because they have to be more organized. College students have more than enough time to study and go to class; they can fit some work into their schedule. It’s not like the “lost” time would be spent on more studying. It’s a great way to earn some money, but also to make personal contacts outside of other college students, and career contacts. And to build job skills. My college limited student workers to ten hours per week (eight for freshmen). In four years I worked as a secretary, a computer help-desk person, a tutor, a tour guide for prospective students and parents, and a department gofer. Work-study can be a great way to try out different fields without needing to make a commitment.

    • Absolutely – if the right opportunities were there for them to work a little, build a resume, network, etc, then I would certainly encourage that. I would rather them not have to work the crazy hours I did (fast food on college campuses are nearly open 24 hours!), because quite honestly that does have an effect on study time, sleep habits, etc.

  9. Jason,
    I plan on paying for tuition and books for sure for my children.
    I may kick in for accomodations as well, but any lifestyle choices will be borne by their own spending money.
    I definitley thin that there needs to be a balance between helping your children through college and giving them a “free ride”.
    I have also seriously considered the strategy of having them take out loans to pay for thier own education and then paying the loans off as a graduation present. (Without them knowing that would be the gift.) Adds a little motivation and hopefully some responsibility in the mean time.

  10. Great post. This is a huge point of contention in our family.

    My wife believes that kids can work their way through school, not realizing just how much the cost of education has skyrocketed since she was an undergrad. Unless the kid is a crack dealer, it’s just not plausible for them to go to a decent schools without significant family resources.

    And 20 years from now it will be even worse.

  11. I helped both of my kids financially during their college years by taking out Parent Plus loans for anything they couldn’t get a student loan for. It “feels” like I paid (am paying) about 85-90% of tuition, room and board and BOOKS. My son worked summers for spending money and paid rent when he lived off-campus. My daughter commuted to school and worked full time.
    They both did well in school and have good jobs and not a lot of debt to start out with. Grad school is on them, and I’ve suggested that they shop around for a good deal if they can’t get tuition reimbursement, as it’s expensive and there’s no instant salary increase when they have higher degrees.
    I don’t regret one dime of my “investment” in their education.

  12. I was lucky enough to have a parent who believed not only in the quality of education, but that she’d be damned if I got into debt for it. I am 40 and have friends still paying off student loans from the 90′s. I fully intend to pay for my children to go to university. I also will not require them to work for spending money/living expenses. They have both done charity work starting at a young age and that’s enough. I will encourage them to do internships during summer vacations but not work some crappy job for spending money. They’ll spend the rest of their lives working. The way we choose to do it may not work for some, but it works for our family. My mother never made me work and always made sure I was provided for- and I hope she’d say it was worth it. BTW, my mother wasn’t wealthy- she was just raised by frugal parents and is naturally frugal herself. She was a secretary who put herself through night school (paid with cash) to become an office manager and was a single mother for most of my childhood until she remarried when I was a teenager. I view it as a moral necessity to pay for your child’s education. I don’t expect anyone to agree with me, and that’s ok. It works for us. My husband and I have always lived on one salary, I’m naturally frugal, and we have never had the debt issues many people have. But I enjoy following and reading your blog and you have some excellent points/articles.

    • I fully agree that students should not work a job for the spending money. They should work for the experience. THe more they can work/volunteer within thier chosen field while in school, the more apt they are to start thier professional career on a higher level (income and responsibility).
      Also, thank you for showing the benefits of frugal living. It is all about spending our income on things that we find valuable (education) and cutting back on things we don’t.

  13. Our 3rd daughter just graduated from college a couple of weeks ago — debt free. All three of our children were expected to cover the cost of tuition themselves and we paid for their room and board. We explained this scenario often as they grew up. They each started saving half of their babysitting money as young girls and then half of their income when they took on more lucrative jobs in high school. By the time they left for college each had around $10,000 in their bank accounts. We also pointed out that if they earned any scholarships, then their bank money stayed in the bank and was obviously theirs to keep. Our oldest daughter never paid a dime of tuition because of scholarships, the other two paid about half of their tuitions with scholarships. While in college they were HIGHLY motivated to keep up their grades because they were paying for it themselves and it also made scholarships possible! They knew how much money each semester cost them and how much it cost to be sitting in each class. They also held down part time jobs while in college and worked each summer to keep their bank accounts healthy enough for the next year’s tuition. We learned this system from good friends who had all 6 of their children graduate from college debt-free. I think it is a wise transition from living at home where mom and dad cover most expenses to adulthood where you are expected to be completely (financially) on your own.

  14. I had a similar experience to you, Frugal Dad. I would like my kids to have a more positive college experience vs the Neitschze-esque times we had. (ie, whatever doesn’t kill you will only make you stronger). I want my kids to build character, but it doesn’t need to be over the top.

    At the same time, I don’t want to fund a 4 year party for my kids. I will expect them to work during school and summer for pocket money and car if they need one.

  15. I like the way you framed the college contribution as a gift.
    Parents should not feel an obligation (guilt) to provide a college education for their children nor should the parent (or child) go into debt to pay for college. If the parents have saved for the purpose of helping their children then helping them out is great. If parents are paying for college they should be very careful about letting their children sponge off of them however. If you as the parent are paying thousands of dollars a semester for college your adult child can work/save for the $100 pair of jeans, gas money, etc.
    The idea that it is impossible or even a hardship to work through college is silly. There are many programs available that are very cost effective (community college). Additionally, with the abundance of online degree programs from many good colleges and universities, students can work full time while at home (removing the room, board, and transportation costs) and take nearly a full load of classes with a very manageable schedule.
    Just like most of the ideas on frugal dad, it almost always boils down to being creative and reducing costs on non-essentials so that money can be spent on priorities. Some parents prioritize a college education for their children. I would bet the drop in grades from high school to freshman year in college would be much less if they student were working to pay for the schooling.

  16. I worked my way through college and finished paying off supplemental college loans right after I was married. My wife on the other hand had everything paid for by her parents yet was given a budget to live on. Since having many discussions with my wife about this issue, I have also softened my initial views about having our kids pay for their own college. Working during school definitely teaches you to become responsible with your time and money; however it does takes away from the entire school experience. I think that working during the summer will be a good middle ground for us once our kids are of age.

  17. Based on what I know now, first fund a 401(k), then fund a Roth-IRA (which can also be used a college fund and doesn’t count for financial aid), and then fund a Covendale Education Account. Then, if there is still money left over, fund a 529.

  18. It’s interesting that, given your and your wife’s experience, that you are going the opposite route for your kids. Many parents who worked hard to get thru college adamantly believe that their kids should do the same.

    As others noted, it is important to set academic goals. It’s also important to be sure that your kids really do want to go to college and/or to a particular school. We’ve observed that when parents pay for college they often have a lot of say about which college the kids will attend, the curriculum, etc. And this can cause real problems. Many parents will only pay for an education if kids study a particular field, go to a particular school, etc.

    We have friends who are funding their daughter’s college education. The husband is a pharmacist and strongly influenced both his daughter’s choice of school and major.

    For numerous reasons, she did not do well at various times during her four years and in fact, was forced to drop out twice because of poor grades. This caused enormous problems within the family as the parents lost a considerable amount of money in the two semesters when she was forced to drop out. (In essence, they ended up paying for five years of college!) And they were more than a little upset with their daughter, who seemed less than concerned with her academic failure.

    In reality, it seems she never really wanted to pursue her field of study and may not have even wanted to go to college.

    It caused a rift between the parents and with them and their daughter that continues.

    If this is a gift, as you say, then it’s hard to give with any sort of strings, whether it is choice of college, curriculum, location, etc. A gift might even preclude a mandatory grade level.

    It seems to me that most parents who pay are really looking at this as an investment in their children, rather than a gift (with no strings). It’s more honest to say that it IS an investment in the child’s future ability to sustain themselves in the world. (And no, not necessarily to provide for parents. In many cases, that is really the only reason some parents want their kids to do well: They want some form of insurance that the kids can take care of them, too.)

    The hardest choice is for parents who cannot afford to put themselves at risk (whether by co-signing loans or using money that should be saved for themselves and their future). Is it easier to have someone pay your way and not incur debt? I would imagine it is.

    I paid my way through school by working during the year and summers; had a grant and scholarships. It was not easy and I’d be hard-pressed to want to see anyone I loved go through that. BUT…the upside was that I learned a work ethic that has served me well over the years. And it only increased my desire for a college education. However, it did limit my school options going in and that is something I regret.

    When you grow up knowing that if you want to go to college, you are going to have to pay for it, you have a whole different attitude about getting and staying in. I did my share of socializing in college, but it had to fit within my work and study schedule. I’m actually grateful for that discipline because again, when I entered the workforce after college, it was not a shock to my system. I actually had MORE free time when I was working full time!

    From my observation, the kids who work the least hard in college are those who have no debt and no real personal investment in a monetary sense.

    I sometimes think that parents do a disservice to kids by paying outright. Want to help? Make it an interest-free loan and allow the kids a couple of years out of college to get decent jobs before they start paying back. This, to me, makes more sense, for both the parents and the kids. Also, if the kid drops out or is thrown out, for whatever reasons, the loan is payable immediately. (YOu need incentive for these kids to look for work, and not just move back in.)

    One of the toughest situations I ever watched was a single mom who co-signed a loan for her son. He subsequently inherited money from his father’s death, literally ran through it and saved nothing for school (and it was a considerable sum of money that would have paid for all four years of college but he did not allocate ANY of it for that purpose).

    The kid dropped out in junior year because he “had no money.” and his mother could not co-sign another loan. In the meantime, he could not find work, moved back in, and stopped making payments on his loan, and his default wrecked his mother’s financial record. (There was no way she could pay for his student loans, which she had told him from day one.)

    I questioned why his mother co-signed a loan in the first place given her own precarious economic situation. Her reply: Well, how could I not help my son get to college? I trusted him.

    I don’t think parents owe their kids an education, even if they have money. I do think if parents can afford it, they can loan the money. Outright gifting would be great except to be honest, few parents can really give a gift in the true spirit. Most then have high expectations or their own agenda (yes, even well-meaning folks).

    Would you still give a gift if it meant a kid would drop out? Or allow the kid that option going in? What if the kid pursued a major you thought was a waste of time?

    • I agree 100% my observations through post-secondary were very similar to yours Gemmond. It was DIFFICULT to work and study at the same time and make all the bills on time, but not impossible, and through the experience I learned very strong work ethic and the respect for the real value of a good education. LIMITS are reality in adult life, not a bad lesson there. I had no opportunity to move back home or default on anything, and I was resentful of my friends that had their parents pay their way and squandered it flitting from one major to another, or doing poorly because of partying. They also had the strings attached, and the resentment that went with those. My choices were limited only by time and money, and those are the same restrictions I live with every day!

  19. I agree this is a tough one. I just covered this topic myself since our oldest has just started college visits this year. The price tag on these colleges are outrageous, so asking them to pay seems nearly impossible.
    We have come up with a system in which we will pay for half. My daughter, as a junior, has already been working on scholarships. However she earns her half is up to her.
    I think just flat out paying for your kids college gives them that sense of entitlement. Not every kid, but some kids can take advantage of the situation and just get straight A’s in social life. When they have to pitch in it changes how they approach things. Or at least we hope it changes how they approach things.
    We also recently learned to never, as parents, co sign on a student loan. If anything happens to your child you will be responsible for the loan. If they are only ones signing, then the debt gets wiped clean.

    • I like the idea of splitting the costs, or at least sharing them. That’s how we plan to approach buying a car, etc I’ve told my kids I’ll match whatever they save towards their first car – probably won’t be when they turn 16. Of course, it is easier to raise a couple grand for a car as a teenager than half a $14,000 tuition bill. Still, if they plan long enough, and work hard enough, it is certainly doable.

  20. My parents paid for books and tuition, everything else was on me (housing, food, car, gas, insurance) so I worked nearly full time during the whole 4 years. My only memories of college are of working, studying or sleeping – there was no time to party or fool around – but I finished on time in 4 years and have been financially independent since then, so I feel like I got good habits out of that experience. I don’t have any kids, but if I did, I would pay for at least half of it, so they wouldn’t have to work so hard, but not make it so easy they didn’t feel committed to the process through their own contributions.

  21. Our gift to the children was a good education. That meant the benefit of a private education (K-12) and college. They only had to work for spending money. They had a four year limit and reasonable grades. They met both. They are successful adults. One went on to become an attorney (he paid for law school) and the other successful in business.

  22. My husband and I are on a 10-year state 529 plan into which we put nearly $600 a month for our 2 daughters. It will provide the average-weighted cost of tuition and fees at a state college or university. The sad part is that even with our foresight and willingness to do this (which has reduced our disposable income for other things we would have enjoyed as a family like traveling, etc.), it still will only pay about half the cost of a year of college b/c room and board is almost as much as tuition.

  23. What are everyone’s thoughts on college athletics?
    Of course a full scholarship clears all of this up, but I was on a partial (read: small) hockey scholarship.
    Hockey is a long season (Sept. – March) and leaves little time for work outside of practice, training, study etc.
    I graduated with $40,000 in student loans. But, I don’t think I’d trade my experience for being debt free at graduation.
    Thoughts?

  24. Right now with our financial situation, I hope to be able to pay for atleast one year of college and expenses. Our son knows our expectations, A’s and B’s (he is smart so this is not hard for him), and we are hoping that good grades will pay off with scholarships. We are a little relentless about getting a college or trade education after high school because we feel that this is a neccesity for the majority of people in order to become financially independent.

  25. I agree with the concept of helping your kids with college – I got through on grants (for one year), my mom, my stepfather, getting credits to skip one year, and then loans for my final year and for graduate school. I paid them off and they weren’t a huge burden – but seemed so a the time. I’ve decided against a 529 Plan because the market is to volatile and the fees are too high. I use the concept of Bank on Yourself – Google it – and feel much more comfortable that I will have all the principle put aside + steady growth and since I can borrow my own money to pay for other things and pay it back I can create accelerated growth for my daughter’s college fund. I plan on having $100K funded before she hits 6th grade so I can be sure there is plenty for her to leverage or to use to start a business or see the world.

  26. In India it is customary for parents to pay for their children’s education, including higher education and weddings (which are as lavish as they can afford, with maybe a loan or two).
    Generally kids make the most of these educational opportunities and try to excel, scholarships are there for the meritorious and economically weak. A few do go haywire, but by and large, Indian kids want to make something of themselves.
    When they start earning they are expected to look after their aging parents, who often live with them. But all this has been changing. There was a time when there were no old age homes in India, now there are several. Many students are going in for education loans. So we are gradually opting for the western way of life.

  27. I enjoyed this article and the comments as it displays exactly the “debate” I have been hearing the last few years as my oldest daughter approaches her senior year in HS. I have adopted a hybrid approach to FD’s concept. I intend fully to assist my kids through college. Mine and my wife’s parents helped us 25 years ago and we sincerely appreciate their assistance. The hybrid is that my three daughters are expected to pay for more than just “fun money” or incidentals, but contribute as much as they can towards college. This will include working full-time during their summers after high school and working 10-20 hours a week during college. Although I’m not happy or excited about college loans, if they are necessary we will get them. Together with my daughters I will assist them with paying them off – likely some type of 50/50 split. Several variations for payoff are possible – all depending on the employment level and possiblities at graduation. For instance it could mean I pay the first couple years of payments until their income comes along, it could mean paying exactly half the payments each year or some other creative split of the loan.

    The bottom line is that I have saved a substantial amount of money for my three girls to attend, but it likely won’t be enough. We will work together to get them a great college education, but we won’t let the rest of their life be ruined with debt. And we have got one of the three through Financial Peace University while in high school. When the other two get old enough, they will to. Through “pre-education” they will fully understand the perils of debt before entering college.

  28. There really is two “prongs” to the decision to help:

    Can you afford it?

    Are your kids responsible enough not to blow it?

    My wife’s father could afford it, and she was responsible enough not to blow it.

    On (or around) her 18th Birthday, her father gave her 30k. (this was about 12 years ago). It was for school, or starting a business, or blowing on whatever she wanted, no stings, but expectations.

    She set it aside, and paid for school herself through hard work.

    My first year of college (tuition only) was covered by my folks, I also got a 15 year old car from my grandfather. I covered everything else.

    We came out of school with zero debt. Fast forward 6 years. Her father handed us 10k for our wedding/house downpayment. Instead of upping our wedding spending, we paid for it ourself, and set the 10k aside.

    By 25 years old, we were sitting on 100k in cash, while never making more than 60k between us.

    I can’t tell you how far ahead that’s put us compared to our friends and co-workers. Sure, her dad gave us 40k. But we saved 60 more. That has allowed us to buy the home we wanted, pursue the jobs we wanted, and live how we want.

    We’re setting aside the same for our kids. $120 dollars a month into an RESP for 18 years equals about $50k. (When you include the government portion and figure 5% returns.)

    Maybe they blow it, maybe they don’t, all you can do is give them a shot.

    I see no reason why you would let your kids go into debt to somebody else when you can keep that from happening.

  29. Frugal Dad, just happened on your site the other day. Enjoy reading it. Sounds like we have a lot in common, at least as it relates to frugality.

    I have been on my own financially since I was 17. I joined the Navy straight out of high school. While I did not grow up poor (there was always plenty of food on the table), as one of 6 children of a factory working father, there were few “extras”. Having college paid for was out of the question.

    Because of the GI bill and numerous part-time and summer jobs, student loans, etc., I was able to work my way through college. Back then, student loans were at 3% simple interest (with payments only beginning after graduation). I can remember clearly the last payment on that loan and the pride I had it paying it off. After that, I was able to get a law degree by a scholarship/grant combination, working part-time and summers, etc. While working and going to full-time law school undoubtedly hurt my grades, I had no choice as I was on my own. Later, I was fortunate to get a company paid MBA. (I am obviously an education addict).

    I started my son in his own “business” when he was 10 years old. He was a big kid for his age so I suggested he earn money by mowing yards. I let him use my lawn mower, paid for his gas, and he was soon making about $40 per week mowing a couple lawns. I taught him that businesses have expenses besides revenue and made him conscious that I was covering his expenses and the benefit that was. He could keep half of his money and the rest went toward college.

    I started saving for my children’s education early in my career. Savings bonds deducted from my paycheck went along way to making it painless. While I was willing to pay for college for both of my children, they understood that spending money and other incidentals were on their own ticket. I did the same with my son’s first car….he had to put $3,000 of his own money in it as I wanted him to have a vested interest in ownership. He took great pride in that car and the fact that he helped pay for it. Today, my son’s business success is, in large part, due to the work ethic he learned at an early age and his appreciation and respect for living within his means.

    I was happy to be able to give my children the gift of an education. I can think of no investment that could have been better for either of them. The cost of tuition, room and board, etc. are astronomical and too many young people are behind the eight ball with debt as soon as they graduate. Both of my children are very appreciative and neither feels like I owed it to them to pay for a college degree. This is despite the fact that we live in an affluent Texas community where most children have no appreciation of money and the HS parking lot is full of BMW’s and other cars that I did not even know existed when I grew up. My children, unlike their peers, had no expectations of an “easy life” and are extremely grateful for anything I have financially provided to them.

    My view is that if there is anyway that you can afford it, invest in your children’s future by paying for their college. Always have expectations and limits to your investment, such as good grades, requiring part-time/summer jobs (that do not detract from their educational efforts), use of their own money for “entertainment” and spending (e.g. fraternity dues, partying, etc.), and other extras that are more “wannas” than needs. Before each went to college, we sat down and they had a clear understanding of what I would pay for and what was their responsibility.

    Sure, I could have made them do it “my way” and pay everything on their own. They may or may not have succeeded. The difference was my parents had no choice or options. Through alot of hard work and some luck, I had the options. Paying for an undergraduate college education for my children was the best money I ever spent. They both also know the value of advanced degrees and both clearly understand that pursing those on not on Dad’s ticket. My son managed to get a company sponsored MBA and my daughter got a Master’s Degree in Spain by working in a bilingual school teaching English to Spanish children and going to school at night.

    Bottom line, if you can give your children the gift of an education at the undergraduate level, do not hesitate to do so. If you can’t financially afford to pay for all of it, do what you can. My goal has always been to start my children on a higher rung of the social ladder than I had….not by giving them money, but by investing in their future. Having done that, it’s now their turn and choice on how to capitalize on that investment. The ball is in their court.

  30. Paying for a child’s college education is great. However, from my perspective as a college graduate, who raised my two kids with the philosophy of the importance of getting a college education, I question today if college is really worth it. From a cost benefit analysis, the increase in tuition and other fees are not paying off with adequate career compensation. Too many young graduate are sacked for years student loan debt. Today, I would consider using the money for other options, such as helping them start a business, or buy their first home.

    • Adam, you make an excellent observation. I agree that we seem to have a warped view that everyone must go to college. Yet, very well compensated jobs for skilled trade workers can’t be filled due to lack of training and specialized education. Skilled plumbers, electricians, auto mechanics (that today are very sophisticated given the computer and electronics diagnostic abilities needed on modern cars) all pay better than what many college graduates will ever experience. We need to change our view that everyone must go to college. I have traveled in Europe a great deal and have always noticed the professionalism of many restaurant waiters who take great pride in their profession. I’ll never forget that when I was in high school there was a person there who did not do well academically, but was a whiz when it came to industrial arts. He got the “last laugh” over those who used to poke fun at his academic limitations. At a high school reunion, he showed up and, as it turned out, had become a very successful contractor. Many of those that had poked fun were noticably silent.

  31. This is a fabulous post. I have one child in college right now and wish that I had begun saving a long time ago. The little bit I did have wasn’t nearly enough and I would love to take that burden off of her ’cause I have it on me from my education. I have three younger children and must get a serious plan together for their future and, as you said, I’ve gotta do the same for my future.

  32. College loans are not inevitable. Graduating college debt-free should be the goal of every student (and a tremendous gift from their parents). How do you do it? It might involve changing expectations about what college is, but in general:
    - Save first, reduce expenses through scholarships or living at home, then pay as you go.
    - Size your education to what you can afford doing that.
    - Look for other alternatives like work-study programs or employer-sponsored tuition grants.

  33. If you are planning on paying for your kids college. You might want to open a ROTH account instead of the 529 plan. 1) tax free when you use the money for education and 2) if your child doesn’t got to college you can still use it for retirement. Just a thought to think about.

  34. Dear Frugaldad, I would like to ask you a simple yet hard question. What good is a college education going to do for your kids if when they graduate, they cannot find a job???

  35. I plan to help my two kids out with college, following the same rules I had, with one change.

    I got school paid for as long as I got good grades – As and Bs, Cs discussed. This included lab fees, parking passes, books, etc. That lasted about two semesters.

    Then, things reversed. I had to pay for college and all expenses, and they would be reimbursed 100% for As and Bs, 80% for Cs, and nothing for anything else.

    Now, here’s the part I’m going to change. I’m going to become a lender, with full rights to run a credit check on them. Why? I got student loans, then got paid by the parents, and spent the money, took out more loans, and now am still paying it all back. I don’t have any problem with them taking out loans, as long as they are paying them off with the funds I provide them to do so, if they get to that point.

  36. Great post. I like how you discussed having your children working for their own spending money. I think it is important that kids understand the importance of work, but at the same time if you as a parent are in a position to help your children avoid accumulating student debt, it can be a great thing. Receiving and undergrad and especially a masters or doctorate, can be very pricey.

  37. My husband and I both took out student loans to pay for our college. We absolutely plan to help our children with college barring any unforseen changes in our financial situation. I understand that working for things helps you appreciate them more but I don’t think I appreciate my personally-paid for college education any more than I would have if my parents had been able to help me. When I first started out, I looked around and saw how much my peers who had no student loans were able to do. They were able to buy homes earlier. They were able to work hard without feeling trapped due to debt. They basically were able to have a fresh start.

    People who complain about kids expecting everything to be handed to them should keep in mind that 18 years of training and child rearing are the bigger impact. If you teach your children to work hard and be wise with money for 18 years, they’re not suddenly going to become ingrates who fritter away your assistance because you help with paying for 4 years of college.

  38. We opened up a 529 account for both daughters when they were 3. My oldest wasn’t sure if she wanted to go to college as she is more the “get by on my dazzling personality” than academic. Well, she decided it would be grand to go to junior college in Santa Barbara (1 1/2 hours north of us). So she got set up in an apt with 3 other girls right next to campus and started college. Year one was a growing experience. She dropped 2 classes for various reasons. We are going into year 2 and she will be working part time and only taking a couple of classes. She will be paying 1/2 her rent and by next year, she will be on her own. I see nothing wrong with helping her because we have the 529 account. But there is a limit to how much we will pour into it. Kids need a place to grow up between 18-21. Santa Barbara is a good a place as any!

  39. I was lucky enough to have my parents pay for my tuition for all 4 years when I went to UCLA. A lot of my friends that graduated with me had more than $50,000 of student loans to pay off. I still know those who werent able to find a decent job, are still living at home with their parents and cant afford to move out. It just seems with the high cost of higher education today, if its even worth it to go to college for a major in a low paying field and have a mountain of student loans that take forever to payback.

    On a side note, I am of those people that got a 4 year degree and then did nothing with my major. Although I do run a successful business now, my parents were absolutely livid at the time after paying for my 4 years in college.

  40. I took the path you recommend “start a 529 when or if possible before your first child is born”.

    I’m glad I did too, my son is getting straight As and my daughter is testing out above her current grade in subjects. While I’m not 100% sure they will go to college, the trends say that they will.

    Surprisingly after years of savings and crummy stock market dips, I only have the first few years covered! My son is almost 11 and I’m starting to get worried about the amount I have. I believe I can afford a public college, but a good private college might be out of our price range.

    We’ll see :)

  41. We prepaid for our kids college education. That way we paid for enough credit hours to graduate. It was up to the kids to make sure they passed their courses or they’d be responsible for any extra cost.

    It worked well. They had some ownership in their performances.

  42. I read all comments, my question is where to start? and how much is enough to begin with and how to plan for retirement ?

    Roy

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