Archive for April, 2013

Why You Shouldn’t Pay For Your Child’s Education

I can already hear the protests – why would you deprive your child of their education? If you have the money, what good could possibly come from depriving your child of the chance for a bright future?

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The truth is that tuition costs have risen to a ridiculous rate in the United States and paying for an overpriced education can be a recipe for disaster. What kind of concept of money will your kids have after they spend 6 years in school, rack up mid six figures in debt, and it gets magically paid off for them? How long will it take for them to appreciate the value of money?

Note: I’m not saying its bad for anyone to pay for their child’s education, this is simply my personal philosophy.

1. Force your child to make more reasoned choices

If your child knows that they’re going to have to pay their whole loan back one day, it can force them to attend a more reasonably priced school and save their money. The typical teenager with a job spends every dime of their paycheck. If your child knows that they are going to be responsible for their own education, it will force them to make wiser choices, or face the consequences.

2. Instill independence

I personally tried to teach my kids to be financially independent as soon as they were old enough to work. Granted it took awhile, and it certainly wasn’t easy, but a financially disciplined teenager can actually go a long way towards paying for their own tuition if they make some sacrifices and choose wisely. Look at it this way, taken from an example from my eldest son:

Age 16: part time job for 15 hours a week x $10.00 per hour for 8 months (5250) + 40 hours a week x $10.00 per hour for 2 months (4000). That’s $9250 they earned in the year, minus $2250 for their own expenses , that leaves them $7,000 saved up in the bank.

Age 17: Let’s say they get a pay raise to $12.00. With the same working hours, they’ve now earned $6300+$4800 = $11,100, and saved $9,000. They’ve now saved $16,000 total

Age 18: Let’s say they worked hard, and they’ve managed to get a raise to $15.00. Not unreasonable at all. This year, they earned $7875 + $6000 = $13875 and saved $11,000, bringing their total to $27,000 in the bank, not counting the interest they’ve earned on their deposits. That’s definitely a good start for an 18 year old, I know a few middle aged adults who don’t have a liquid $27,000 sitting in the bank.

Age 19: At this point, if they studied hard enough they might have managed to land a scholarship to a decent school. If not, they could always take a year off and work. When they’re in school they can work part-time and full time in the summer (4 months of the year), and they can do a co-operative program that rotates work terms. There are plenty of ways of making college work, without resorting to hand outs.

Is it easy? No, but in my humble opinion, the character built through hard work and sacrifice is much more important for future success than ensuring that they have an easy path through an elite college.

3. Tuition doesn’t need to be six figures

What’s wrong with a cheaper school? Are we saying that no one outside of the Ivy Leagues ever accomplished anything in this world? Nonsense.

4. Good Grades -> College -> Good Job Is Not The Only Path

Do we really need to worship at the altar of higher education? The typical middle class path we suggest for our children is to get good grades, graduate from college, and get a good job. Then find a nice girl (or man), buy a nice house in the suburbs, have some kids, and work until you hit retirement age. Every parent seems to want their child to grow up as a neurosurgeon making the big doctor salary, or a corporate lawyer, making that big law cash.

But that’s really not the only path to success – especially with the power of the internet enabling people to start their business with virtually no costs. I’ve encouraged my children to take a path of entrepreneurship if they chose to, but I also supported their decision to go to college – as long as they were willing to pay for it themselves. Being forced to make this decision, in my opinion, has made my kids who did attend college much more appreciative of the whole experience.

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