Why You Should Save for Your Child’s Education…and Why You Shouldn’t

This is article one of three in my saving for college series. See the others here:

• Saving for Your Child’s Education: Making the Right Decision
• 4 Ways to Save for Your Child’s College Education

Now that our beautiful little bundle of poop has been the highlight of our lives for a couple of weeks now, you better believe my gears are turning in regards to if/how we’re going to save for his education.

My wife and I come from different backgrounds in this regard. Once I left the nest, my parents didn’t pay for any of my education or living expenses. In fact, I came home from a two-year missionary service in Germany, my dad told me, “Let’s go find you a car to buy, because you’re not driving mine.”

A little harsh? I didn’t think so, and I still don’t. I grew up with a little tough love and it worked for me. My wife’s parents, on the other hand, covered a good portion of her costs while she was in college up until we got married.

From my experience talking with young couples during my financial planning internship, the spectrum on this topic is fairly wide and quite heated, especially when two spouses are on the opposite end 🙂 So I thought it would be fun to take you on a little journey as I explore this for our own purposes. The first part in the series will be exploring the pros and cons of saving for your child’s education. Second, I’ll discuss how you should approach the decision for yourself. And third, we’ll go through some of the different options available to do it.

Why you should consider saving for your child’s education

1. So your kids can focus more on their studies and social lives. One thing I regret about my time at college is that I didn’t spend enough time with friends. I was working full-time because I wanted to avoid student loans and I was doing school full-time because I didn’t want to take 10 years to finish school (I finished in 6 by the way…hey at least I beat Tommy Boy). A typical day for me started at or before 5:00 a.m. and often ended after midnight, with nothing but school, job and eating in between. In fact, the first time my wife and I hung out was when she walked past my apartment on a Friday night, saw me doing homework alone, and asked me to come watch a movie with her. With all the stress and schedule pressure, I eventually got to the point with most of my classes where I didn’t care about my grades because I was just so burnt out.
2. Student debt is CRIPPLING. According to this report, only 31% of college students got through college unscathed by student loans in 2013. For the rest, state averages ranged from $18,650 to $32,800. That’s a lot of debt, peeps. And it all comes due at a critical time when people tend to start accumulating even more debt in the form of auto loans, credit cards, and mortgages. It’s ridiculous. Personally, I’m convinced that there are ways for college students to get around subjecting themselves to mounds of student debt. But who knows what it’s going to be like in 20 years? College tuition is outpacing inflation, so it won’t surprise me if the issue doesn’t get much worse.
3. You have no idea what the future holds. “My kids will have scholarships.” That’s the most common reasoning I’ve heard as to why someone isn’t planning on helping their kids out. But even if your kid gets a full-ride, there are still expenses that need to be paid, such as rent, food, supplies, books, transportation, hot dates, etc. And what if your kid doesn’t get a scholarship? Depending on what school they want to go to, it might be harder than you think. Here’s my motto: “Don’t make future decisions now.” If you’re worried you’ll save all this money and your kid ends up getting a scholarship, great! Keep your money.

Why you should let your kids go it alone

1. You’re having to choose between college and your retirement. Never ever ever put your child’s college education ahead of your retirement. Why? Because as ugly as student loans are, there’s no such thing as retirement loans. Just remember the flight attendant’s pep talk. Don’t help someone else with their oxygen mask until yours is on. You may think you’re a great parent for doing it, but your worth as a parent isn’t founded on your ability to financially provide for them when they’re adults. Take care of your future first, then if you can help them invest in theirs, do it.
2. It’s a perfect case study in financial self-reliance. Like I said above, as nice as it would have been to have some of my expenses covered by my parents, I learned some valuable lessons in independence. I ended up getting student loans after getting married and switching to part-time work, but I graduated with a loan balance well below the average. That sense of self-reliance has also driven me after graduation to create opportunities for myself when I couldn’t find them in the “normal” path (you know, graduate, get a real job, etc.).
3. It’s just not important to you. The best thing about personal finance is that it’s personal. Something that’s super important to me may be something you wouldn’t waste your time on. If it’s really not that important to you to save for your kids’ college educations, don’t. And don’t let anyone make you feel bad for it. It’s your money.

I think we’ll probably go the route my in-laws did with our kids. As much as I valued my experience, I don’t think it’s the only way to teach your kids financial self-reliance. And if we can do invest in their future while also safely putting enough away for retirement, then why not?

What are your plans for your child’s education? Do you have any pros or cons to add to the list?

(photo cred)